When a securities firm fills a customer's order to sell stock by purchasing the shares directly into its own proprietary account, in what capacity is the firm acting?
- As a principal acting as a dealerAnswer
- BAs an agent acting as a broker
- CAs an underwriter in the primary market
- DAs a depository organization performing clearing functions
Answer
As a principal acting as a dealer
A financial firm acts as a principal (dealer) whenever it executes a transaction directly against its own inventory account.
Step-by-Step Solution
Key Concept
Broker (Agent) vs. Dealer (Principal) Capacity