A securities firm executes an order on behalf of a retail client by matching the client's buy order with a sell order from another market participant. The firm charges a commission for facilitating the transaction and does not take the securities into its own inventory. In this transaction, in what capacity is the firm acting?
- Agent capacityAnswer
- BPrincipal capacity
- CClearing agency capacity
- DQualified Institutional Buyer capacity
Answer
The firm is acting in an agent capacity because it matched a buyer and seller without using its own inventory and charged a commission.
When a broker-dealer acts as a middleman matching buyers and sellers without taking securities into its own inventory and charges a commission, it is operating in an agent (broker) capacity.
Step-by-Step Solution
Key Concept
Broker vs. Dealer Roles and Transaction Capacities
Estimated Time:45s