This has a lot to do with the leverage offered by forex brokers.
In stock trading, stock brokers do not offer large leverage, although they provide a margin account that helps them buy shares in large quantities with minimal initial capital. However, some forex brokers provide leverage that is large enough up to 1: 1,000 so that traders can make transactions even with only $ 10 capital.
# Stock brokers are targeting the middle to upper segment of society
Due to the absence of large leverage, stock brokers can only offer their services to the upper middle segment of society whose number is relatively smaller than the lower middle segment of society. This is realized by stock broker business actors so that the situation will become very difficult if a large number of stock brokers appear and a phenomenon like today arises where the number of stock brokers tends to be fewer than the number of forex brokers.
# Forex brokers target the upper, middle and lower segments of society
On the other hand, some forex brokers dare to offer trading accounts with large leverage, even up to 1: 1,000, thus opening up opportunities for the public to trade forex with a capital of only $ 10. So that forex brokers are quite aggressive in offering their products to the middle and lower segment of society, which is very large in number.
Due to the large number of reasons, it is not surprising that the number of forex brokers is greater than the number of stock brokers. People with small capital can feel the sensation of forex trading with only $ 10, while stock trading requires at least a larger capital of up to $ 100.
# The forex market implements an over the counter system
Stock trading will be much better if done through a mechanism that has been determined by the capital market manager. So that various strict regulations were made, including in the brokerage sector, such as a minimum capital whose value is large enough to limit the number of stock brokers. On the other hand the forex market does not have a special market like the capital market because it implements an over the counter system so that many types of brokers appear in large numbers. Although in recent years many countries have tightened regulations for forex brokers so that the emergence of new forex brokers has begun to decrease.
Why are there more forex brokers than stock brokers?
To talk about more between the number of forex brokers and the number of stock brokers, we actually need sufficient data. And it seems it will be very difficult to collect these data. Because there are 195 countries in the world alone and only 35 of them do not have stock exchanges. This means that there are still 160 countries that have stock markets and these countries should also have local stock brokers.
Meanwhile, forex brokers are even more difficult to detect. Because many forex brokers do not have regulations either locally or internationally. Moreover, there are also many fake companies claiming to be forex brokers, even though they are actually a money game. And on the other hand there are also binary options platforms that claim to be forex brokers, even though the transaction mechanism in binary options itself is not a trading mechanism, but betting or gambling.
In US alone the number of registered forex brokers only reaches 60 companies. Meanwhile for stockbrokers even more. Because there are more than 100 of them. In other countries it might be different, maybe there are more forex brokers and fewer stockbrokers. But, for a rough idea, in Indonesia alone there are 2 times more stockbrokers than forex brokers. So, is it true that there are more forex brokers overall? or even more number of stockbrokers?.
But for sure, we really won’t know except by taking the time to collect data on the number of stockbrokers and forex brokers from various countries in the world. But of course it won’t be easy, because data sources and so on may also be difficult to find.
Special stock brokers, if in that sense securities companies can indeed be counted on the fingers. What’s the reason? The securities firms are bound by geography. What is traded is the original form of shares both in the secondary market and the primary market. Securities companies cannot trade shares from other countries.
But if only brokers trade stocks, at this time the type of broker who sells shares must also sell forex, it’s a package plus an index with commodities and even cryptocurrencies.
For offshore brokers, they sell CFD products, so they are not real assets. They only trade the fluctuations and the price is obtained from those selling platforms such as the most popular Metaquotes. They sell all kinds of products. The stocks that are traded are mostly shares from the United States because they are most in demand, they are easy to trade, and easy to analyze.
Every product must pay for a license, so what’s the point if the product is traded? So that the forex and stocks that are sold have been chosen according to the large volume which can provide benefits for the broker.
There are still many brokers specializing in selling stocks, called securities, but brokers specializing in selling forex are hard to find.
Forex can be easily sold because there is also a lot of interest in retail circles, especially in institutional circles, this is what causes forex volume to beat stocks. So if the broker only focuses on forex products, the turnover will be more profitable even though the broker is a dealing desk type.
This is possible because the forex market is OTC (over the counter). So buyers and sellers from all corners of the world will be brought together in the forex market. Apart from that, there are also liquidator providers, so that we can sell without having to buy currency first. Every transaction that occurs will be thrown directly into the market (NDD brokers) or managed independently (DD brokers).
Meanwhile, if the stock is not like that. For stock brokers, the rules are strict. If you want to trade stocks in US, you have to use a broker registered in US. Stocks here are not CFDs. So the impression is less. Plus the way it works is somewhat different from a forex broker. Stock brokers usually work as intermediaries between stock owners and buyers. Most obvious if the buyer wants to buy in large quantities (billions of rupiah). Later the broker will look for interested share owners. If there is, later buyers and sellers can meet face to face to negotiate. And brokers get a commission for transactions that occur. Meanwhile, if the money is small, the way it works can be done online. We just have to buy before we can sell.
