What is Broker?
In short
A licensed intermediary that routes your orders to the market and holds your shares in custody.
When choosing a broker, verify its licence and regulator (in the US — SEC/FINRA, via FINRA BrokerCheck).
Learn more →A broker is the licensed intermediary between you and the exchange. It opens your account, accepts your money, sends your orders to the market and holds the shares you buy in your name (custody). An ordinary investor can only reach a US exchange through a broker.
What to look at when choosing a broker
- Licence and regulator. US brokers are overseen by the SEC and FINRA and can be checked on FINRA BrokerCheck. Brokers elsewhere operate under their own financial regulator — find out which one.
- Real stock or CFD. Some platforms sell CFDs instead of real shares. You are then not the owner of the stock — an important difference for both risk and halal compliance.
- Costs. Commissions, deposit and withdrawal fees, currency conversion, account fees. On a small account these eat a large part of the returns.
- Margin. Many brokers open a margin (borrowing) account by default; if you want to avoid interest-bearing debt, ask for a cash account.
- Features. Fractional shares, order types, extended-hours trading, a mobile app.
Protecting your money
At a licensed broker, client assets are kept separate from the broker's own money. For US brokers, SIPC provides protection up to a set limit if the broker fails — but it does not protect against market losses.
Broker terms change often, so re-check fees and conditions on the official website on the day you open an account.
Example
A fictional case: you start with $1,000.
- A $30 bank wire fee → $970 arrives in the account. That is a 3% loss up front (30 ÷ 1,000).
- A $1 commission per trade: in and out is $2. Ten trades a month = $20, or $240 a year — about 25% of capital (240 ÷ 970 ≈ 0.247).
The same costs on a $20,000 account: the wire is 0.15%, yearly commissions 1.2% (240 ÷ 20,000). The takeaway: costs weigh far more on a small account, so a low-fee broker and fewer, better trades matter.
Mistakes and tips
Look at the regulator's register, not ads and promises: verify the licence number yourself on the official website.
Read the withdrawal terms in advance — some platforms make deposits easy and withdrawals hard.
A "commission-free" broker still earns money another way (spreads, FX rates, fees) — work out the total cost.
Try your first trades on a demo account, then move to a real account with a small amount.
Frequently asked questions
- Do I lose my shares if my broker goes bankrupt?
- At a licensed broker client assets are segregated, so they are normally transferred to another broker. US brokers add SIPC protection, but none of this applies to fraudulent or unlicensed platforms.
- Which broker is halal?
- A broker itself is not halal or haram — what matters is what you buy and how your account works. Real shares, a cash account and avoiding margin and interest are conditions many scholars focus on.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- What a stock is and why its price movesA stock is a real slice of a business. IPOs, market cap, how price forms, where returns come from, and the risks.Open lesson · 11 min
- How the US market worksExchanges and brokers, sessions in Tashkent time, spread and liquidity, five order types with examples, T+1, costs and fractional shares.Open lesson · 12 min
Try the theory without risk
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- Short interest: what short positions tell you (and is shorting halal?)What short interest and days to cover mean, how to read FINRA data, what it doesn't tell you — and what scholars say about short selling.
- Price alerts and watchlists: follow the market without watching it all dayThe US market is open in the evening and at night in Tashkent. How a watchlist and price alerts let you catch the right moment without staring at charts.
- Trading journal: what to record and how to analyse the resultsA journal isn't a notebook — it shows which of your decisions make money and which lose it. What to record, which numbers to watch, and CSV import.