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Dealers possess certain qualities that distinguish them from brokers and traders.

A dealer is a person or firm that trades securities on his own behalf. He assumes the risk and acts as a principal for his own account. A broker acts as an agent and sets up trades between buyers and sellers. Dealers will charge a markup when they sell from their inventory; brokers charge a commission.

A dealer is a different from a trader because a dealer buys and sells securities as part of his regular business. A trader buys and sells securities for his own account, but not as a business.

Dealers also make markets, underwrite securities, and provide investment advice, among other tasks. Most also act as brokers and are known as broker-dealers.

Individuals must register as dealers if they:

  • Are willing to buy and sell a specific security on a continuous basis
  • Run a matched book of repurchase agreements, or
  • Issue or originate securities that they also buy and sell
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