Definition:
A brokerage fee is a commission charged by a broker or brokerage firm for executing a trade on behalf of a client. It’s typically a percentage of the transaction value, but can also be a flat fee or a combination of both.
Key points about brokerage fees:
- Commission: Brokerage fees are a form of commission paid to the broker for their services.
- Transaction value: Brokerage fees are typically calculated as a percentage of the transaction value.
- Negotiable: Brokerage fees can be negotiable, especially for large accounts or high-volume traders.
- Online vs. traditional brokers: Online brokers generally charge lower brokerage fees than traditional full-service brokers.
Why are brokerage fees charged?
- Services: Brokers provide a range of services, such as research, advice, and order execution, which are reflected in the brokerage fees.
- Revenue: Brokerage fees are a major source of revenue for brokerage firms.
It’s important to compare brokerage fees from different firms to find the best deal.
In essence, a brokerage fee is a commission charged by a broker for executing a trade on behalf of a client.
