FINANCIAL RISKS OF BROKER’S ACTIVITY

Abstract

Changes in the Ukrainian economy and the development of the financial market are of interest in solving the problems associated with brokerage activities. These issues are of particular relevance in connection with the increased attention of the state to investment activity and interest in the growth of financial literacy of the population. One of the important tasks in this context is the study of financial risks of professional participants in stock markets. As the dynamics of asset prices in the financial markets have a significant range of risks for both the investor and the broker. And if the investor’s job is to choose the most optimal portfolio of assets and control over possible losses, then the broker assumes the risks of trading decisions of a set of clients. In addition, he should take into account the risks of liquidity and voluntariness of a set of customer positions. Today, Ukraine has no single approach to the definition and classification of financial risks of brokerage activities, and therefore this study is intended to analyze the types of financial risks of brokerage companies in the stock market and to clarify certain concepts of types of financial risks. The article identifies sources and causes of financial risks of brokerage companies. The interpretation of the concept of «financial risk» by domestic and foreign scientists is researched. Author’s definition of financial risk for the broker is provided. The questions of classification and grouping of financial risks of brokerage companies that arise in the process of activity in the stock market, which allow reducing investor losses and increase the efficiency of management in an unstable market and increase the income of brokerage mines from the provision of services, are considered. It is established that the most significant financial risks of brokerage activity are the risks of investor behavior, investment risks and risks of marginal lending, and the determining financial risks for a brokerage company are the risks associated with the behavior of the investor and the investment of capital in financial assets. The study of the issues covered by this article will provide an opportunity to contribute to increasing the financial stability of brokerage companies and their investors and will contribute to the improvement of the financial system of the country.

Keywords

• brokerage companies
• financial risks
• investor
• broker
• financial markets
• brokerage activities