Broker Glossary

The complete broker glossary: every term a trader meets when choosing and using a broker, defined in plain English with examples, the money angle, and the red flags most sites leave out.

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Broker Glossary — A to Z reference

Every broker term in plain English, with the mechanics, the money angle, and the red flags most sites leave out.

Broker Models

A-Book: Broker routes your trade out to the market
B-Book: Broker takes the opposite side of your trade
Hybrid Model: Routes some flow out and keeps the rest in-house
Market Maker: Quotes both prices and fills from its own inventory
ECN Broker: Routes orders to a network of liquidity providers
STP Broker: Passes orders straight through to providers
DMA: Direct market access to the order book
No Dealing Desk: Execution without manual desk intervention
Dealing Desk: Desk that manages and may take client orders
Internalisation: Filling client orders against the broker book

Execution

Order Routing: How orders are sent to venues for filling
Smart Order Routing: Algorithm choosing the best venue automatically
Requote: Broker rejects your price and offers a new one
Last Look: Provider brief option to reject an order
Latency: Delay between order and execution
Execution Speed: How quickly your orders are filled
Partial Fill: Only part of an order is executed
Price Improvement: Getting filled better than the quoted price
Best Execution: Duty to get clients the best possible terms
Sweep-to-Fill: Filling a large order across price levels
Slippage: Difference between expected and actual fill price

Costs & Pricing

Spread: Gap between bid and ask; your entry cost on every trade
Raw Spread: Market spread with no broker markup
Commission: Per-trade fee charged by the broker
Markup: Extra added to the spread as broker revenue
Swap Fee: Overnight interest charge on a held position
Financing Charge: Cost of holding a leveraged position
Inactivity Fee: Charge applied to a dormant account
Withdrawal Fee: Cost to withdraw your funds
Conversion Fee: Cost to convert between currencies

Margin & Leverage

Leverage: Borrowed buying power that multiplies gains and losses
Free Margin: Equity available to open new trades
Used Margin: Equity locked in open positions
Margin Level: Equity divided by used margin, as a percent
Margin Call: Warning that equity is too low to hold trades
Stop Out: Automatic closure of trades when margin runs out
Negative Balance Protection: Guarantee you cannot lose more than you deposit
Margin Requirement: Capital needed to hold a given position
Leverage Ladder: Leverage that drops as account size grows

Liquidity & Infrastructure

Liquidity Provider: Institution quoting buy and sell prices
Tier 1 Liquidity Provider: Major bank supplying interbank liquidity
Prime Broker: Bank clearing and financing for institutions
Prime of Prime: Intermediary giving brokers institutional liquidity
Aggregation: Combining many price feeds into one book
Liquidity Bridge: Middleware linking platforms to providers
FIX Protocol: Standard messaging language of trading systems
Matching Engine: System pairing buy and sell orders
Co-location: Placing servers beside the exchange for speed
Netting: Offsetting positions into a single obligation
Securities Lending: Lending shares, enabling short selling
High-Frequency Trading: Ultra-fast automated trading strategies
Latency Arbitrage: Exploiting price-feed delays for risk-free gain
Toxic Flow: Order flow that is unprofitable for the broker

Account & Safety

Segregated Funds: Client money kept separate from company funds
Investor Compensation Scheme: Fund that repays clients if a broker fails
KYC: Know your customer identity verification
AML: Anti money laundering controls
Demo Account: Practice account using virtual funds
Account Type: A tier of account with set conditions
Islamic Account: Swap-free account using an admin fee

Asset Management

PAMM: Pooled account managed for many investors
MAM: Manager trades allocated across sub-accounts
LAMM: Lot-based multi-account allocation
High-Water Mark: Fees charged only on new profit peaks
Performance Fee: Share of profit paid to a manager
Management Fee: Fixed fee charged regardless of performance

Regulation

FCA: UK financial conduct regulator
ASIC: Australian markets regulator
CySEC: Cyprus securities regulator
FSCA: South African market conduct regulator
CFTC: US derivatives regulator
NFA: US futures self-regulatory body
ESMA: EU authority setting leverage caps
MiFID II: EU framework for market transparency
Systematic Internaliser: Firm dealing on its own account off-venue
Multilateral Trading Facility: Regulated venue matching third-party orders
ODP Licence: SA authorisation for OTC derivative providers
Leverage Cap: Regulatory limit on retail leverage

Platforms

MetaTrader 4: Widely used forex trading platform
MetaTrader 5: Multi-asset successor to MT4
cTrader: ECN-focused trading platform
TradingView: Charting platform with broker integrations
NinjaTrader: Futures trading and analysis platform
FIX API: Programmatic connection for institutional orders

Broker Tech & Back Office

White Label: Rebranded platform run under your own name
Turnkey Brokerage: Complete package to launch a brokerage
Introducing Broker: Partner who refers clients for commission
Rebate: Cash back on spread or commission
Broker CRM: Back-office system managing clients and compliance
Clearing: Reconciling and confirming trades before settlement
Settlement: Final transfer of ownership and funds
Dividends Manager: System applying dividend adjustments to CFDs