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Any person, other than a bank, engaged in the business of buying
or selling securities
on its own behalf or for others. See: 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
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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.