Floor Broker (FB)

Definition

The investing term floor broker refers to an independent member of an exchange that helps execute client orders.  Floor brokers buy and sell securities from a specialist; attempting to get the best possible price for their clients.

Explanation

Also known as a pit broker, a floor broker (FB) works on a stock exchange floor.  The broker does not trade on their own behalf; rather they represent their clients' interests.  Floor brokers earn a commission on each transaction, typically in the one to five cents per share exchanged.  Clients include large financial institutions, mutual and pension funds, high net worth individuals, day traders, as well as hedge funds.

When an order is sent to the broker, they engage the floor specialist in that stock.  The broker then proceeds to bid against other floor brokers in order to obtain the most competitive price for their client.  Once the transaction is complete, the trade information is relayed back to the client.  While the broker and market specialist are individuals sharing verbal information on the floor of the exchange, the data is transmitted back to clients electronically.

Related Terms

margin account, stock exchange specialist, scalping, day trading, position trading, swing trading, over-the-counter market, American option, European option, ABC Agreement