Stock Brokerage : Their Roles And How They Work

Stock brokerage are the same as stock or securities brokers. These questions may be in the minds of new investors who are about to join the capital market. This term is also often mentioned in articles or news that discuss the development of the capital market.

There are still many people who do not know how to manage their money properly so that the money they have can provide lasting benefits. Not infrequently they ask for help from a third party to help manage their money. Many of them use financial advice services.

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And stock brokerage so they can choose the right alternative to money management. In other words, a stock broker is a person who acts to represent the interests of securities to buy and sell shares on the Indonesia Stock Exchange (IDX) or through transactions outside the stock exchange.

What is Stock Brokerage

A stockbroker is simply a company or individual that provides services to connect investors (whether companies or individuals) with the capital market. For example, if you want to buy shares from an issuer, then you cannot buy them directly from the company.

You can't buy it from the capital market either. Well, this is where the role of brokers appears, which is to connect you as an investor with the capital market to make transactions. That is, they are parties that carry out business activities of buying and selling securities for their own interests or for other parties.

Difference Between Stock Brokerage and Financial Adviser

Many people believe that stockbrokers and financial advisors have the same function, in fact they are different, just related to each other. The term stockbroker is a person who makes buying and selling transactions in the stock market.

Or in other words, an agent who sells and buys shares according to investors' orders. The stock brokerage will also explain and advise which stocks are bought and sold for. Whereas financial advisers are people who provide more services than stockbrokers.

Such as planning for retirement, advising on good investments, providing tax information, even protection such as insurance. You can also choose the best securities company that provides reliable financial advisory services and has received recognition from many parties.

The Role of a Stock Brokerage

In order to be able to carry out the profession as a stockbroker, a license must be obtained from the regulator, namely a Broker-Holder Representative license from the Financial Services Authority. To obtain a professional license from the OJK.

Stockbrokers must first obtain the WPPE capital market professional certification. This certification can be used to apply for a professional license to the OJK. The following are the duties of a stock brokerage, among others:

  • Selling and buying shares in accordance with investors' orders
  • Give recommendations on which stocks to buy or sell
  • Provide information, explanation, or advice on buying and selling shares to investors on a regular basis

In addition, securities companies have a role to support the existence of the capital market in terms of facilitating the circulation of money and information. Stock brokers also have the task of increasing investment activities in the capital market which is one of the things that support the national economy.

Then what are the main functions of a stock brokerage ? Here is the explanation :

1. Underwriter

In this first function, the activity of a brokerage firm is to conduct a public offering of securities of issuers, companies listed on the IDX with or without an obligation to purchase unsold securities.

Securities companies and stock brokerage also act as underwriters when the company is about to go public, i.e. conducting an initial public offering (IPO).

2. Securities Trading Broker

In this second function, stockbrokers act as intermediaries between investors and the capital market in stock transactions. The company also has a duty to trade securities for its own interests, customers, and other parties.

How Stock Brokerage Work

The way stockbrokers work, the point is to carry out investors' instructions while carrying out trading transactions in the capital market. If an investor orders a broker to buy and sell shares, then the individual or the securities broker will execute the order.

Only the investor can decide the price and volume of the transaction, according to the availability of funds. So that the broker does not have the authority to determine the amount and number of stock transactions. The great responsibility of stockbrokers cannot be separated from the government's role in oversight.

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The government has a Commodity Futures Trading Regulatory Agency (CoFTRA) which is tasked with overseeing the performance of stock brokerage. So investors don't have to worry about the job security of a stockbroker or a securities firm.

Stockbroker Fees

Using the services of a stock or securities broker is not free. They will quote service fees from their investors. The amount of these stockbroker fees varies, usually ranging from 0.1-0.3 percent of the value of the buy transaction or 0.2-0.4 percent of the sell transaction.

In addition to stock brokerage fees, there are other costs that you should know in advance.

Here are the fees charged to investors:

- Brokerage commissions (broker fees) are fees charged by securities to investors in the process of submitting transaction orders for the purchase and sale of shares to the IDX electronic trading system.

The amount varies from the transaction value of the shares (including value added tax/VAT) and plus income tax (PPh) of 0.1 per cent for the sale of shares.

- A transaction fee (levy) is a transaction fee charged to investors each time they make a sale and purchase transaction of shares for the use of exchange transaction services or facilities.

The amount is a levy of 0.04 percent of the transaction value which is added up from a 0.01 percent fee for BEI, 0.01 percent for KSEI, 0.01 percent for KPEI clearing fee, and 0.01 per cent for the KPEI guarantee fund.

- Value Added Tax (VAT) is a levy levied on every added value of an item or service transaction. The tax rate set is a single rate of 10 per cent.

- Income Tax (PPh) is a tax imposed on the income of individuals, companies or other legal entities. The tax is levied only on the sale of shares.

Conclusion

You can also consider the following various award winning guarantees. With the achievements achieved, it means that the performance of the stock brokerage is quite good. Of course, stockbrokers or trading applications who are officially listed in the OJK securities list. Here's the review!

1. Mandiri Sekuritas

Mandiri securities is one of the best securities companies ever to receive the Best Broker award on the IDX. Mandiri Sekuritas also has a record share transaction of Rp. 205 trillion. IDX also awarded Mandiri Sekuritas Best Exchange Member in the Investor Growth category

In addition, part of this state-owned company has also won four awards simultaneously in 2018 at the Finance Asia Country Achievement Awards. The awards won were Best Debt Capital Markets House, Best Investment Bank, Best Broker, and Best Equity Capital Markets House.

2. IndoPremier

This stock brokerage firm received the best title in 2019. In addition, PD with securities code also won the Best Indonesian Domestic Bond House award at The Asset Asian Awards event. In addition, IndoPremier has also won various awards since 2015. One of them is the Best Securities Company 2015.

3. Panin's Warranties

At the IDX Appreciation 2018, Panin Sekuritas received awards as the Best Exchange Member in the Financial Performance Category 2018. The company also won the SPEx2 (Strategy for Performance Excellence) award with a special theme, Navigating Digital Shift in the securities industry from Media Group Tempo.

4. Phillip's Warranties

Phillip Sekuritas won the Best Online Trading Award 2015 and a Special Award in the Best Social Activation category. Phillip Sekuritas continues to receive several other awards.

5. Trimegah Warranties

Trimegah Sekuritas is the best securities company and stock brokerage that has received many awards, including the Best Listed Company 2017 in the Securities and Mutual Funds sector organized by Investor Magazine.

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