When a broker-dealer sells a security to a client and charges a commission on the transaction, it is acting as the client's Agent
What is broker-dealer ?
- Without owning the securities, a broker-dealer who buys or sells securities to a customer is acting as the client's agent or broker. On this kind of transaction, the client pays a commission and the broker-dealer bears no risk.
- The client is assessed a markup or markdown when acting as a principal.
- A broker-dealer purchases stocks, bonds, and other types of securities. Then, at a price greater than the purchase price, they sell the shares to a different investor.
- The dealer's spread, which is the difference between the two prices, is what the broker-dealer calls the profit it makes from the transactions.
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