Stock Market Jobbers

Stock Market Jobbers (or stockjobbers) are special mercantile agents dealing in the wholesale trade of securities with brokers in their name for profits. They are the key factor in providing liquidity to the securities market by acting as market makers.

They primarily worked in the London Stock Exchange as the major source of buying and selling securities in bulk orders. As a result, they provided a steady cash supply to the securities market. In addition, they specialized in intraday trading due to their keen eye for securities price movement for their customers. As a result, they prevented the monopoly of brokers in trading.

• Stock market jobbers definition refers to special agents of the securities market that entail bulk trading of securities with brokers to get profits in the stock market.
• They maintained the liquidity of the securities market until 1986 when the UK government introduced electronic trading in (London Stock Exchange) LSE, and the fixed commission got abolished.
• Jobber and broker differ from each other as broker trades directly with the clients and jobber never trades with the client, jobber earns profits and broker earns commissions, jobber trades for themselves and broker trades on behalf of clients. 

Stock market jobbers were unlicensed special agents that used to trade wholesale securities in their name with the brokers of securities markets. They acted as market makers. They never dealt directly with the customers or traded in the securities market. Rather, they were the person conducting the buying and selling of securities on the floor of the securities exchange with stockbrokers. They were the main link between the securities market, brokers, and customers.

Their way of working or other details does not exist as they never got recorded. Jobbers were active until 1986 on the London Stock Exchange (LSE). Stock market jobbers used to have an inventory of tradeable securities bought in bulk at discounts. Every tradable security used to pass through stock market jobbers' books before being traded on the London Stock Exchange. The bulk buying of securities by stock market jobbers was used to provide the stock exchange with much-needed cash for increasing the liquidity in the market. Similarly, selling these securities to brokers at high fixed prices gave them good profits.

The other function the stock market jobbers association performed was keeping a check on the monopoly of stockbrokers while acting as a facilitator of securities trade. Furthermore, the digitization of securities led to the opening of securities trading for the average person. Also, the innovation of governments globally to bring electronic trading of securities adversely affected the existence of the jobber. Plus, the termination of the fixed commission also discouraged people from taking up the role of stock market jobbers. All the above factors led to the decline and subsequent extinction of the profession of stock market jobbers.

The three types of stock market jobbers are the following:

1. Bulls: This jobber buys the securities at low prices to hold them in the hope of selling when the prices rise and then selling at profits. It leads to upward movement prices of securities. It also symbolizes optimism in the economy. As a result, the market is called bullish.
2. Bears: This jobber believes in selling securities when they feel their prices will decrease to make profits. But unfortunately, it makes the market bearish, and the economy struggles during this phase. 
3. Stags: These stock market jobbers work in primary markets and buy new securities offered for trading to the public in the belief that these securities get undervalued. They are important to markets as they guarantee the maximum subscription of securities.

Let us know how stock market jobbers function through a few examples below. 

Example #1

Let there be a broker X who has many clients in need of trading on a particular type of securities as it has good returns. However, X can't buy so many securities on behalf of his clients. Hence, it will look up to stock market jobbers to arrange the particular type of securities for their clients.

Jobber will then provide broker X with the requisite quantity of securities at a higher rate than he had bought. Hence, the jobber will profit by trading those securities with the broker. 

Example #2

Let there be a jobber B who has bought securities at $30 per unit in bulk by using stock market jobbers equipment for trading with brokers. He has plans to sell it at $35 per unit to the customers to earn desired profit. Hence, the jobber sends the sell signal to the customer interested in buying the 100 securities.

However, the customer misunderstood the selling signal and offered to buy at $29.50. As a result, the jobber lost $0.50 per unit on its cost. Hence, they faced a loss of $50 on the entire securities trading. 

Although both jobber and broker deal in securities trading for earning profits but their methodology and working style differ a lot, the following table depicts the differences:

This article has been a guide to What are Stock Market Jobbers and its meaning. Here, we explain its types and examples and compare them with brokers. You can also go through our recommended articles on corporate finance –

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