Broker-Dealer

Broker-dealer

Any person, other than a bank, engaged in the business of buying or selling securities on its own behalf or for others. See: Dealer.

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Broker-Dealer

A person or, more often, a firm that acts as a broker for some transactions and a dealer for others. That is, as a broker, he/she conducts transactions on behalf of clients, and, as a dealer, he/she trades on his/her own account. In practice, most brokerages are in fact broker-dealer firms. Most broker-dealers must register with the SEC.

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broker-dealer

A firm that functions both as a broker by bringing buyers and sellers together and as a dealer by taking positions of its own in selected securities. Many firms that are commonly called brokers or brokerage firms are actually broker-dealers.

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Broker-dealer. A broker-dealer (B/D) is a license granted by the Securities and Exchange Commission (SEC) that entitles the licensee to buy and sell securities for its clients' accounts. The firm may also act as principal, or dealer, trading securities for its own inventory.

Some broker-dealers act in both capacities, depending on the circumstances of the trade or the type of security being traded. For example, your order to purchase a particular security might be filled from the firm's inventory.

That's perfectly legal, though you must be notified that it has occurred. B/Ds range in size from independent one-person offices to large brokerage firms.

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Broker-Dealer

What Does Broker-Dealer Mean?

A person or firm that is in the business of buying and selling securities and operating as both a broker and a dealer, depending on the transaction.

Investopedia explains Broker-Dealer

Technically, a broker is only an agent to a transaction who executes orders on behalf of clients, whereas a dealer acts as a principal and trades (buys and sells) for his or her own account. Because most brokerages act as both brokers and principals, the term broker-dealer is used commonly to describe them.

Related Terms:
• FINRA
• Market Maker
• Nasdaq
• New York Stock Exchange
• Stock Market