More people will understand the definition of a broker than they will that of a jobber. There are many forms of brokers in business, including insurance brokers and mortgage brokers. A stock broker deals with customers, like members of the public, and buys shares on the stock market on behalf of those customers. But what is a jobber?
Jobbers make their money by buying and selling shares and derivatives within the stock market. They are not allowed to deal with the public and this is the reason that few people have ever heard of them. Jobbers make their income from the difference in the buying and selling price. This difference is not because the share price has moved, but because the jobber buys and sells the shares at a different price in the same instance. This is similar to money exchange companies that will buy your foreign currencies at a worse exchange rate than the one they buy it for. For jobbers, this “spread” in prices that gives them their profit on each transaction is called the “jobber’s turn.”
The job of a broker is to introduce a buyer to a seller. The brokerage charges a commission for this service, but is not, otherwise involved in the transaction. The contract of sale is between the buyer and the seller and the brokerage has no obligations within the contract.
A broker only works on commission and never buys or sells shares on his own account. A jobber is barred from accepting commission and never buys or sells share on behalf of others. These two differences in operating dictate the entire business strategies of jobbers and brokers. Brokers need to get customers in order to make a profit, so they advertise and always look for new clients. Jobbers can only deal with a limited number of people and so their business ethic drives them towards building one to one business relationships with the limited number of parties they are ever likely to deal with.
It is impossible to spot jobbers in the London Stock Exchange, because the position has been abolished. The “Big Bang” in 1986 got rid of the jobbing system and left all trading on the exchange to brokers. Even brokers were emasculated by the evolution in trading practices, because the kingpin of the exchange became the trading platform and quotes system. The switch to a computerised system eventually reduced the importance of brokers as a mediator for access to the stock market by the general public. Internet-based systems and automated trading algorithms now marginalise the skills of brokers.