What Is a Broker? Explained for Beginners
A broker is an intermediary that executes your investment orders on the stock exchange. Without a broker, you cannot buy shares or ETFs — private individuals do not have direct access to exchanges like Euronext Amsterdam or the New York Stock Exchange. Every modern online broker gives you this access through an app or website, usually within seconds.
If you are based in the Netherlands and wondering where to start, this guide explains exactly what a broker does, how they make their money, how to verify whether one is safe, and which brokers are available to Dutch investors today.
What Is a Broker and How Does It Work?
The process is straightforward. You open an account, deposit funds, and place an order — for example, “buy €200 of VWRL.” Your broker receives that instruction, routes it to the relevant exchange, and the shares appear in your portfolio, typically within a few seconds during market hours.
Modern execution-only online brokers — such as eToro and DEGIRO — handle this automatically via their platforms. You never speak to a person; the system processes your order electronically. This is why online brokers are dramatically cheaper than traditional bank brokerage services, where a human advisor is involved.
Ready to open a broker account? eToro is regulated by CySEC (licence 109/10) and available to Dutch investors. ETFs carry €0 commission; US stocks are $1–$2 per trade.
51% of retail investor accounts lose money when trading CFDs with this provider. Investing involves risk. You may lose some or all of your invested capital.
Types of Broker: Which One Do You Need?
There are two main categories of broker relevant to Dutch beginners:
Execution-only brokers
These brokers carry out your orders — nothing more. They do not give advice on what to buy. In exchange, their fees are low. Almost every popular online broker falls into this category: eToro, DEGIRO, and Trade Republic are all execution-only platforms. For most beginners investing in ETFs or individual shares, execution-only is exactly what you need.
Full-service brokers (and bank brokerage)
Dutch banks such as ABN AMRO, Rabobank, and ING also offer brokerage services. These include personal advice but charge significantly more — typically €5–€15 per transaction versus €0–€2 at online brokers. Unless you specifically want human advice and are willing to pay for it, a full-service bank broker is rarely the most cost-effective choice for a beginner.
How Does a Broker Make Money?
Understanding a broker’s revenue model helps you avoid hidden costs. No broker operates without earning something — the question is where that cost sits. Here are the main models:
1. Commission per transaction
DEGIRO charges a transaction fee for most purchases — for example, €1 + external costs for ETFs outside their no-cost Kernselectie list. This is transparent: you see the fee before you confirm the order.
2. The bid-ask spread
When a broker advertises “$1–$2 stock commission (ETFs 0%),” the cost often moves into the spread — the difference between the price you buy at and the price you could immediately sell at. eToro charges $1–$2 commission per stock trade (NL) and ETFs, but a small spread is built into the price at execution. For long-term investors buying and holding, this is typically negligible.
3. Foreign exchange conversion fees
eToro prices all assets in US dollars internally. Every time you deposit euros, eToro converts them to USD and charges a 0.5% currency conversion fee. On a €1,000 investment, that is €5 immediately — and another €5 when you eventually withdraw. DEGIRO charges a separate FX fee for shares listed in non-euro currencies .
4. Overnight financing (CFD brokers only)
This applies only if you use CFDs (Contracts for Difference) — a leveraged product where you do not own the underlying asset. Keeping a CFD position open overnight incurs a daily financing charge. For long-term investing in real stocks or ETFs, you will never pay this fee. It is worth knowing about because some brokers offer both CFDs and real assets — make sure you know which product you are using.
5. Payment for order flow
Some brokers receive payment from market makers for routing your orders to them, rather than sending them directly to an exchange. This is legal in some jurisdictions but was banned in the EU under MiFID II rules, which apply to all brokers operating in the Netherlands. EU-regulated brokers are required to achieve “best execution” for your orders .
Want to compare how eToro and DEGIRO charge you in practice? Our detailed comparison shows exact fee calculations for a Dutch investor.
Read the DEGIRO vs eToro Comparison →
Investing involves risk. You may lose some or all of your invested capital.
How Do You Know If a Broker Is Safe?
Regulation is the single most important safety indicator. A regulated broker is legally required to keep your funds separate from the company’s own money, report to a financial regulator, and belong to an investor compensation scheme. Here is what to check:
1. Is the broker regulated by a recognised authority?
Look for regulation by one of these bodies:
- AFM — Autoriteit Financiële Markten (Dutch regulator, highest confidence for Dutch investors)
- CySEC — Cyprus Securities and Exchange Commission (EU-regulated, fully valid in the Netherlands via passporting)
- BaFin — German Federal Financial Supervisory Authority (EU-regulated)
- FCA — Financial Conduct Authority (UK regulator, post-Brexit no longer EU-passportable but still a strong authority)
You can verify a broker’s status on the AFM public register or the ESMA registers.
2. What is “passporting” and why does it matter?
Under EU law (MiFID II), a broker licensed in any EU member state can legally offer services in all other EU countries — including the Netherlands — without holding a separate AFM licence. This is called “passporting.” eToro, for example, operates in the Netherlands under its CySEC licence (number 109/10). This is entirely legal and common. You can confirm a broker’s Netherlands authorisation by checking the AFM’s notification register — brokers operating under passporting appear there.
3. Are your funds held separately?
Regulated EU brokers are required by law to hold client assets in segregated accounts — meaning your money is not mixed with the broker’s own operating funds. If the broker were to go bankrupt, your assets would not become part of the insolvency estate.
4. Is there an investor compensation scheme?
All EU-regulated brokers must participate in an investor compensation scheme. For CySEC-regulated brokers such as eToro, this is the Investor Compensation Fund (ICF), which covers eligible retail clients up to €20,000 per investor in the event the broker cannot return client assets. Dutch-regulated brokers fall under the Dutch Investor Compensation Scheme, also covering up to €20,000 (or €40,000 for joint accounts), administered by De Nederlandsche Bank (DNB).
Note: investor compensation covers the broker’s failure to return your assets — it does not protect you against investment losses. If your shares fall in value, that is market risk, not a regulatory issue.
Looking for an overview of regulated brokers available in the Netherlands? Our broker comparison covers eToro, DEGIRO, and more with regulation details for each.
Investing involves risk. You may lose some or all of your invested capital.
Broker Safety Checklist for Beginners
Before opening an account with any broker, run through this five-point check:
- Regulated by a recognised authority — AFM, CySEC, BaFin, or FCA. Verify on the official register, not just the broker’s own website.
- Client funds are segregated — your money is held separately from the broker’s operating funds.
- Investor compensation scheme membership — covers up to €20,000 per investor in the EU.
- Low costs for your investing style — check all fees: transaction costs, FX conversion, custody fees, withdrawal fees. Calculate what you would actually pay on a €100 monthly investment.
- User-friendly platform with a minimum deposit that suits you — eToro requires a $50 minimum deposit; DEGIRO has no stated minimum deposit .
Which Brokers Are Available to Dutch Investors?
Here is a brief overview of the three most popular online brokers among Dutch retail investors. All three are regulated and available in the Netherlands.
| Broker | Regulated by | Stock/ETF commission | Investor protection | Suitable for |
|---|---|---|---|---|
| eToro | CySEC (licence 109/10) | €$1–$2 per US stock trade + 0.5% FX fee | ICF up to €20,000 | Beginners, fractional shares, social investing |
| DEGIRO | BaFin (Germany) | €1 + external costs (€1 per trade via Core Selection (Tradegate, since October 2025) ETFs) | German ICS up to €20,000 | Cost-conscious investors, ETF buyers |
| Trade Republic | CySEC | €$1–$2 per US stock trade | ICF up to €20,000 | Real stock investing (separate from Plus500 CFD) |
Note: Plus500 operates two separate products — Plus500 CFD (leveraged contracts, 80% of retail investors lose money) and Trade Republic (real stocks and ETFs). Always confirm which product you are opening before signing up.
For a full side-by-side analysis including fee calculations for a typical Dutch investor, see our eToro review for the Netherlands and our DEGIRO vs eToro comparison.
Now that you understand what a broker is, the next step is buying your first investment. Our beginner’s guide walks you through every step on eToro — from account verification to placing your first order.
51% of retail investor accounts lose money when trading CFDs with this provider. Investing involves risk. You may lose some or all of your invested capital.
Once you have chosen a broker, you may also want to read our guide on how to buy your first stock in the Netherlands, which covers the full process from iDEAL deposit to placing your first order.
Frequently Asked Questions About Brokers
What is the difference between a broker and a bank?
A broker is solely focused on executing investment orders — buying and selling shares and ETFs on your behalf. A bank provides a much broader range of financial services (savings accounts, mortgages, payments, personal loans) and may offer brokerage as one service among many. Dutch banks such as ABN AMRO and Rabobank have their own brokerage platforms, but they typically charge higher transaction fees (€5–€15 per order) compared to dedicated online brokers like DEGIRO (€1 per order) or eToro (€0 commission). For straightforward share and ETF investing, a dedicated online broker is almost always cheaper.
Do I need a broker to invest in the Netherlands?
Yes. Private individuals cannot access stock exchanges directly — all share and ETF purchases must go through a licensed broker or a bank’s brokerage service. You have two practical options: open an account with a dedicated online broker (eToro, DEGIRO) or use the brokerage service offered by your existing Dutch bank. Online brokers are generally less expensive and have more straightforward interfaces for beginners.
Is an online broker safe for a Dutch investor?
Yes, if it is regulated by a recognised authority — AFM, CySEC, BaFin, or FCA. All EU-regulated brokers are required to hold client assets in segregated accounts (separate from the company’s own money) and participate in an investor compensation scheme covering up to €20,000 per investor. eToro, for example, is regulated by CySEC (licence 109/10) and participates in the Investor Compensation Fund. You can verify any broker’s status on the AFM register.
What does “passporting” mean for a broker in the Netherlands?
Passporting is the EU rule that allows a broker licensed in one EU member state to legally operate in all other EU member states without applying for a separate national licence. In practice, this means a broker like eToro — licensed by CySEC in Cyprus — can legally serve Dutch investors. The broker must notify the AFM of its intention to operate in the Netherlands, and Dutch investors are protected by the same MiFID II rules that apply across the EU. You can confirm a broker’s passporting notification on the AFM’s public register.
What is the difference between a CFD broker and a real-stock broker?
A real-stock broker (also called an “execution-only” broker for stocks) lets you buy actual shares or ETF units that are registered in your name. You own the asset. A CFD (Contract for Difference) broker lets you speculate on price movements without owning the underlying asset — you are entering a contract with the broker. CFDs are leveraged, which means gains and losses are amplified. The majority of retail CFD traders lose money: 51% of retail accounts lose money trading CFDs with eToro, and 80% with Plus500 CFD. For beginners focused on long-term investing, real stocks and ETFs are the appropriate product — not CFDs.