InvestorQ : Will my broker be keen on encouraging me to trade online on the internet?
Anu Biswas made post

Will my broker be keen on encouraging me to trade online on the internet?

Mary Joseph answered.
3 years ago

Actually, your broker will love the fact if you trade online. It is so hard to handle physical broking that brokers love if you are an internet trader. What is that so?

Firstly, internet trading is a huge saving of cost for the broker. No worrying about infrastructure, facilities, manpower etc. That is a major cost saving for the broker. No two opinions about that. Whether you run branches or franchises, the direct and indirect costs of establishing and maintaining the structure is huge. It also takes away your flexibility. Online trading saves the broker these blushes! That is a lot more cost effective.

Broking is all about risk management especially when the markets are volatile. The online broking model focuses on ensuring that risk management is centralized and hence a lot simpler. In online trading the discretion at a branch level or region level is largely absent. Since all the trades and orders are online, the broker has a measure of risk exposure at any point of time. Makes risk management a lot easier.

Lastly, online broking does involve investment in technology, software and hardware servers. But all this is nothing compared to the cost of setting up and maintaining the offline branch system. Moreover, your expansion becomes geometric as physical presence is not required to reach out. All these benefits are passed on to the end customer. Unlike the offline model which is resource intensive, the online model is a one-time investment. Subsequently, the maintenance and support costs are substantially lower than the offline model. A sure kicker for ROI! Online Trading rewards scale by trading higher up-front costs with lower marginal costs.