What is floor broker?

A floor broker, also known as a pit broker, is an independent broker who executes orders on the floor of a stock or commodity exchange on behalf of clients that can include banks or brokerages. They can act as a back-up if the market is overwhelmed by orders. It is their duty to make sure they get the best competitive price available for their temporary clients.

Where have you heard about floor brokers?

You will be familiar with floor brokers from the typical scenes on TV or in movies of a stock market trading floor, such as the New York Stock Exchange.

What you need to know about floor brokers

Floor brokers act as agents for investor clients, giving them the closest thing possible to direct access to the exchange floor. Floor brokers are responsible for assessing market information, prices, competition, and using this information to make the best possible trades on behalf of their clients.

These clients typically include: banks, mutual funds, pension funds and even some wealthy individuals. A floor broker will earn commission on each trade they make on behalf of their client, so it's in their interests to get the best deal.

Floor brokers shouldn't be confused with floor traders, who, unlike floor brokers, trade on their own account rather than those of their clients.