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Analysis: why brokers are needed, how much it costs to be an investor, how exchange assets are protected



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In our blog we regularly write about the structure of the stock and financial markets, various behavioral strategies for investors, fintech technologies, etc. In the last couple of years, there has been an influx of new investors to Russian stock exchanges - this is partly due to growing financial literacy, partly due to low deposit rates, and partly due to serious volatility in global markets, which makes it possible to earn money.

Beginning investors have many questions, from the understanding of the answers to which the success of their activities on the exchange may depend. Today we will try to answer the most important of them.

Why brokers are needed on the exchange


According to current laws, private individuals cannot directly sell and buy shares on the stock exchange. This requires a license. Specialized intermediaries, called brokers, have it.

The main objectives of the broker:

  • register customers on the exchange,
  • assign codes to them for transactions,
  • keep records of funds and assets (stocks, bonds, etc.),
  • make calculations
  • act as a tax agent of the client (calculate and withhold personal income tax).

In 2019, about three hundred brokerage companies operated in Russia. Among them, there are organizations that are part of a financial group, for example, with banks, and independent companies.

Choosing a broker from hundreds may seem like a difficult task, however, there are quite clear criteria that you should rely on when analyzing. Here's what you should pay attention to:

  • The availability of regulatory licenses - now in Russia it is the Central Bank. Russian brokers should publish licenses of the Central Bank on the site, if you see some strange papers in foreign languages ​​issued by foreign regulators (or some other organizations) - this is a red flag that should not be ignored.
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You can open a brokerage account online . We’ve figured out the basic criteria, now let's talk about what actual costs await the investor.

How much does it cost to be an investor


The money an investor pays when buying stocks and other instruments is far from the only costs you should be aware of. There are several types of brokerage fees.

  • Commission for operations - a certain percentage of the transaction amount. Sometimes turnover is also taken into account - the higher the investor’s trading volumes (many small transactions or not very many, but large ones), the lower the commission. An important point: there is still a commission of the exchange itself, in ITI Capital it is included in the tariffs.
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We have developed a convenient calculator with which you can easily calculate the cost of services. Tariffs can be viewed here, for beginning investors there is an opportunity to use a special free tariff for 30 days.

What happens to stocks if a broker goes bankrupt


One of the common questions is how are the assets of exchange investors protected? It is important to understand that a tool similar to the bank deposit insurance system does not exist for the exchange. That is, the money and assets of customers are not insured. However, if a brokerage company for some reason stops working, then by law, customers should be able to transfer their securities to the depository of another company or directly to the registers of companies that issued shares.

A stock transfer is similar to a money transfer - this is not the most difficult operation, which can also be taxed with commissions.

Of course, in the case of dishonest brokers, problems are possible - in theory, there is a possibility of loss of assets and money in bankruptcy. There have been several similar cases in Russian history, one of the most recent being the bankruptcy of Energocapital.

You can protect yourself from such troubles by choosing a reliable brokerage company that has all the licenses and many years on the market. This seriously reduces the chance of losing all assets.

What to read about investments


In this material, we have collected ten books that will help you understand the structure of the modern stock market, the intricacies of investing in it, and how advanced technologies are used here.

And here we have collected analytical articles about the current situation in the markets in Russia and the world.

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