commission

Commission

A service charge assessed by an agent in return for arranging the purchase or sale of a security or real estate. The commission must be fair and reasonable, considering all the relevant factors of the transaction. Commissions vary widely from broker to broker.

Notes:

The brokerage with the lowest commissions is not necessarily the best one - you get what you pay for. Discount brokerages offer no advice, which can prove to be troublesome for many rookie investors. On the other hand, full-service brokerages offer a more personalized service, but commissions are much higher.

See also: Analyst, Broker, Discount Broker, May Day, Real Estate Agent

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Commission

The fee paid to a broker to execute a trade, based on number of shares, bonds, options, and/or their dollar value. In 1975, deregulation led to the establishment of discount brokers, who charge lower commissions than full service brokers. Full service brokers offer advice and usually have a staff of analysts who follow specific industries. Discount brokers simply execute a client's order and usually do not offer an opinion on a stock. Also known as a round-turn. Commissions are known as round-turn only in futures trading, since the commission is assessed only after liquidation of the position.

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commission

The fee levied by a broker to undertake a trade on behalf of a customer. Because the amount of the commission for a particular trade is no longer fixed, it can vary considerably among firms. See also discount brokerage firm, full-service brokerage firm.

To what degree are brokerage commissions or other fees negotiable?

The ability to negotiate fees and commissions varies from firm to firm. Some firms are very flexible and give the individual advisors and brokers the ability to negotiate fees to some extent. Some firms offer a discount service via the Internet as well as a full service account. The degree of personal service and advice the investor requires will influence the amount of the discount.

George Riles, First Vice President and Resident Manager, Merrill Lynch, Albany, GA