riskless transaction

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Riskless transaction

A transaction that is guaranteed a profit, such as the arbitrage of a temporary differential between commodity prices in two different markets. The evaluation of whether dealer markups and markdowns in OTC transactions are reasonable. According to NASD, markups or markdowns should not exceed 5%.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Riskless Transaction

A transaction where a gain is guaranteed by the structure of the transaction. To give a very simple example, one may find a client who wishes to purchase a security at $10 per share when one knows that the current price is $9.50 per share. One then buys the security at the current price and instantly re-sells to the client for a 50 cent per share guaranteed profit. This is also called a simultaneous transaction. See also: Arbitrage, Risk-free return.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

riskless transaction

A dealer transaction in which the dealer makes a purchase or sale to offset a customer order. Thus, if a customer wishes to purchase 500 shares of Rushville Exterminators, Inc., at $80 per share, the dealer may purchase the 500 shares from another source at $79.25 and resell the stock to the customer at a markup of 75¢. The dealer has entered into a riskless transaction because the purchase will be offset by an existing customer order. The markup on riskless transactions is regulated by the National Association of Securities Dealers. Also called simultaneous transaction. See also five-percent rule.
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.
References in periodicals archive ?
"They had a free ride for a long time because they made riskless transactions with other people's money," observed one industry expert on condition of anonymity.