UK Accounting Glossary
A discount broker is a stockbroker offering low commission rates. The low rates offered by a discount broker are primarily achieved through automation of trading and customer service. A discount broker will often have access to alternate quotation services, allowing trades to execute without incurring exchange fees. A discount broker may also specialize in high-volume trading, reducing rates even further by offering ECN rebates to traders providing liquidity. So-called zero commission trading may be offered by a discount broker. This may be a false economy for thrifty traders; instead of making money on a commission, the discount broker makes their money by either widening the spread or selling the right to execute the order to a market maker who can widen the spread. The discount broker business is extremely competitive, and rates change on a regular basis.
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This glossary post was last updated: 9th February 2020.