Broker

In its original sense a broker is an intermediary: an agent that carries a client's instruction to a market and is paid a commission for doing so without taking a position itself. Retail derivatives trading has stretched the word. A retail CFD provider is licensed as an investment firm and, because a contract for difference is written bilaterally, it is the counterparty to the contract rather than a messenger carrying it elsewhere. The contract exists between the client and that firm, and it can only be closed with the firm that wrote it.

Authorisation is granted by a named regulator in a named jurisdiction and is specific rather than general. It lists the activities the firm may carry on and the products it may carry them on, so a firm permitted to receive and execute orders is not thereby permitted to advise on them or to manage money. The obligations that come with the licence are the substance of what the word guarantees: client money held apart from the firm's own, a stated order execution policy, disclosure of conflicts, and complaint and dispute routes that do not depend on the firm's goodwill.

Firms differ in what happens after an order arrives. Some pass client exposure to external liquidity providers, some net client positions against each other and hedge only the residual, and some retain more of it. Each arrangement produces a different relationship between a client's result and the firm's, which is why regulators require conflicts to be identified, managed and disclosed rather than assumed away. The trip-up is treating the word broker as a credential in itself. It describes a business, and the only thing that verifies one is a licence number checked against the regulator's own public register.