What is a broker-dealer?

Broker dealer is in the business of buying and selling securities i.e. a broker dealer is buyer and seller of securities for itself or for other (Clients). A broker dealer can be a single person or a firm as a whole. Broker dealer firms vary in size from small and medium enterprises to giant companies.

What a broker-dealer do?

Broker dealer performs a lot of financial activities for themselves or on behalf of their clients such as:

• Provides investment advice
• Publish investment research
• Facilitate trade activities
• Raising capital for firms

A broker dealer can be a firm that sells its products to customers or an independent one that sells products from outside sources. According to official numbers by the Financial Industry Regulatory Authority (FINRA), there are almost 3700 broker dealer firms in the US. A broker dealer performs a dual function. They act as a dealer (principal) when trading on their own account and as a broker on behalf of their clients.

Starting your own Broker Dealer:

If you’re wondering how to start you own broker dealer there are some basic steps. To start a broker dealer, you must register with the SEC and join a self-regulatory organization. You can start with an existing company or you can start your own independent firm. If you plan on being an independent broker dealer, you must have $100,000 to $200,000 capital available.

If you decide to be an independent firm it gives you the freedom to run things your way, there will be no unnecessary hindrance by firm bureaucracy but this freedom comes at a cost; substantial risk. If you look at it positively, it’s not just risks that are a hundred percent going to affect you, the substantial rewards are going to be completely yours too.

Experience:

Experience plays an important part in the success of your broker dealer setup. If you’ve already worked as an independent contractor, you’ll have a better understanding of how the industry works. If you’re new to this business it’s better to consult a professional on how to start a broker dealer. There are consulting agencies out there who will guide you about everything you need to know to start your own broker dealer. They will even give you professional guidance regarding the business and you can hire an experienced broker dealer to help you for a while. So the four basic steps to starting a broker dealer are:

• FINRA registration: most important thing is registration with the Financial Industry Regulatory Authority
• State registration(s): then registration with respective state and SRO
• Consultants: get professional consultation on all the rules, regulations, laws and marketing trends on how to start a broker dealer.
• Employees: look for experienced employees for your broker dealer firm.

When you start your own broker dealer firm, expenses can be overwhelming. To control that it’s extremely important to get professional consultation. BD consulting Associates are highly experienced consulting firm and they can provide you all the required guidance you need regarding starting your own broker dealer.