Definition
Payment made to a stockbroker when you buy or sell shares. In general, the level of commission you pay will either be a flat fee (possibly going up in stages according to the size of the deal) or a percentage based on the size of the deal.
An important determinant of the amount of commission you pay will be the kind of service you get from your broker.
1. Discretionary : the broker has general discretion as to how he manages your portfolio
2. Advisory: the broker will contact you to suggest changes in the composition of your portfolio, but he does not have the authority to trade on a completely discretionary basis.
3. Execution only: the broker's primary function is to execute the buy/sell instructions which you give him. He does not give advice either proactively or at your request.
As a rule, execution only brokers are the cheapest for transaction costs.