Financial intermediaries play an important part in the economic balance of society. There are several advantages that the roles of financial intermediaries play. These places bring together borrowers and lenders; people willing to save their unspent money and those wishing to borrow extra. (Amos Web, 2007) Financial intermediaries have provided two strategic advantages to savers. The first advantage that intermediaries perform is to provide many loans. They have established so many loans that those who fall short of payment do not affect those that do not. They have also given a structure that incurs less risk to each individual. Another reason financial intermediaries reduce risk is that by making many loans, they learn how to better predict which of the people who want to borrow money will be able to repay. There are many institutions that provide financial intermediaries for the economy; banks who perform collaterized lending, mortgage banks who pool actuarial risks, stock brokers who deal with information costs, and insurance agencies who deal with diversification. The simple function of the intermediary is the bringing together of buyers and sellers. (Amos Web, 2007)
The role of the broker covers a vast territory. It is not to be confused with the role of a broker/dealer. The broker must have a Series 3 license. When obtained a broker must open an account through a licensed Series 3 commodity brokerage representative. Brokers then are only authorized to buy and sell through the order of their client. The broker must remain ethical in all business transactions that they handle. By establishing this trust with their client the broker w ...