How would you differentiate between Traditional brokers and Discount brokers?

A brokerage firm is a financial institution that enables traders and investors of stock market to buy and sell financial securities. To execute any contract in stock market two parties are required buyer (long position holder) and seller (short position holder). Basically a broker act as an intermediary between buyer and seller and facilitates them to trade on various financial securities. In return brokerage firms receives compensation in the form of commission/fees once the transaction has been executed. We have two types of brokers :

1)Traditional Brokers

2)Discount Brokers

Traditional brokers or full service brokers are the oldest brokers in stock market. They usually undertake more then simply acting as an intermediary to execute the trading process.There services also includes proper researching of stock market to offer necessary recommendations to stock market players as well.Often these firms also offers margins loans in addition to certain client to purchase investment on credit which will be subjected to necessary terms and conditions.

Discount brokers or on-line brokers charge their client comparatively low then traditional brokers.The reason behind low commission charge is that they have their clients perform trade via automated, computerized trading system instead of having an actual stock broker with them to assist with the trading process. Mechanism which they use to offer such low cost service is that these brokers executes orders only a few times in a day. They firstly aggregates orders that is being generated by large number of small investors into one block trades which are formed at some specific times of day.They match all the buy sell orders which comes under one block which ultimately reduced the overall of quantity of stocks to be traded . As quantity of stocks reduces the amount of brokerage to be paid also reduces.

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