Brokers and accounts

Borrow rate

The annualised fee a short seller pays to borrow shares, quoted as a percentage of position value and accrued daily while the position is open.

Broker-dealer

A firm registered to execute trades for customers as a broker and to trade for its own account as a dealer, subject to capital, custody and conduct rules.

Buying power

The notional value of securities you can purchase right now given cash, margin entitlement and current positions — not the same number as your account equity.

Cash account

A brokerage account with no borrowing: every purchase must be paid for in full with settled funds, which removes leverage and introduces settlement timing rules.

Clearing broker

The firm that clears, settles and holds customer assets, often behind an introducing broker that handles the client relationship but touches no money.

Commission

The broker's own charge for executing a trade, quoted per share, per contract, per trade or as a percentage, and separate from exchange and regulatory fees.

Customer protection rule

The US rule requiring broker-dealers to segregate fully paid customer securities and to hold a cash reserve for net customer credit balances.

Day-trade buying power

The intraday purchasing limit for a pattern day trader, typically four times the prior day's closing maintenance excess, available only for positions closed the same day.

Direct market access (DMA)

Sending orders straight to a venue's book under a broker's membership, choosing the venue and order type yourself instead of handing the order to a desk.

Execution quality

How good your fills actually were, measured against defined benchmarks such as the midpoint at arrival, the quote at execution or the interval VWAP.

Free-riding

Buying and then selling a security in a cash account without ever paying for it, covering the purchase with the sale proceeds. It is prohibited and triggers a 90-day restriction.

FSCS protection

The UK compensation scheme covering customers of failed authorised firms, protecting investments up to £85,000 per person per firm.

Fully paid securities lending

A voluntary programme in which a client lends out shares they own outright and receives a share of the borrow fee, with collateral posted in return.

Futures commission merchant (FCM)

A registered firm that accepts futures orders and holds customer margin funds, which must be segregated from the firm's own money.

Good faith violation

Selling a security in a cash account that was bought with unsettled proceeds, before those proceeds have actually settled. Three within twelve months restricts the account.

Held order

An order the broker must attempt to execute immediately at the best available price, with no discretion to wait for a better one.

House margin requirement

A broker's own margin rules, set stricter than the regulatory minimum, often raised for volatile, concentrated or illiquid positions without warning.

Internalisation

A broker or dealer filling your order from its own inventory or against another client's order, rather than sending it to a public venue.

Margin account

An account that permits borrowing against securities, enabling leverage, short selling and immediate reuse of sale proceeds, in exchange for collateral rules and liquidation risk.

Margin interest

The interest charged on a margin loan, accrued daily on the debit balance at a tiered rate that falls as the borrowed amount rises.

Market access rule

The US rule requiring brokers providing market access to maintain pre-trade risk controls under their own exclusive control, which ended naked sponsored access.

Not-held order

An order that gives the broker's trader discretion over price and timing, with no obligation to fill at any particular print.

NSCC

The DTCC subsidiary that acts as central counterparty for US equity trades, guaranteeing settlement and netting members' obligations down to a single figure per security.

Omnibus account

An account holding many underlying clients' positions in aggregate under one name, so the clearing layer sees the intermediary rather than the individual owners.

Order rejection

A venue or broker refusing an order outright, so it never becomes live. Common causes are risk limits, bad prices, insufficient buying power and instrument restrictions.

Order routing

The decision about where an order is sent after you press the button: which exchange, dark pool or market maker actually receives it.

Portfolio margin

A risk-based margin regime that sets requirements from a stress test of the whole portfolio rather than fixed percentages per position, rewarding genuine hedges.

Pre-trade risk check

Automated limits applied before an order reaches the market — maximum size, price bands, notional caps, message rates and duplicate detection.

Rehypothecation

A broker's reuse of client securities pledged as collateral — lending them out or pledging them onward — permitted within limits for margin accounts.

Rule 605 report

A standardised monthly disclosure in which US market centres publish execution quality statistics by security and order size — spreads, speed, fill rates and improvement.

Rule 606 report

A quarterly broker disclosure of where customer orders were routed, the venues used, and the payments received or paid for that order flow.

Settlement cycle

The number of business days between trade date and the date cash and securities actually change hands, written as T plus a number.

SIPC protection

US coverage that restores missing customer securities and cash if a broker fails, up to $500,000 per customer with a $250,000 sub-limit on cash.

Unsettled funds

Proceeds from a sale that have not yet completed settlement, usable for new purchases in a cash account but not for withdrawal or immediate resale.

Wholesaler

A large market-making firm that buys retail order flow from brokers and executes it internally, profiting from the spread it captures.

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