Broker-Dealer

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DEFINITION

A person or firm in the business of buying and selling securities, operating as both a broker and a dealer, depending on the transaction. The term broker-dealer is used in U.S. securities regulation parlance to describe stock brokerages, because most of them act as both agents and principals. A brokerage acts as a broker (or agent) when it executes orders on behalf of clients, whereas it acts as a dealer (or principal) when it trades for its own account.

INVESTOPEDIA EXPLAINS

Broker-dealers fulfill several important functions in the financial industry; these include providing investment advice to customers, supplying liquidity through market-making activities, facilitating trading activities, publishing investment research and raising capital for companies. Broker-dealers may range in size from small independent boutiques to large subsidiaries of giant commercial and investment banks.




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