A member broker-dealer fills an investor's buy order for an unlisted equity security by selling shares directly to the customer out of the broker-dealer's own proprietary account. In what capacity did the firm execute this transaction, and what form of compensation is charged?
- The firm acted as a dealer in a principal capacity and charged a mark-up.Cevap
- BThe firm acted as a broker in an agency capacity and charged a commission.
- CThe firm acted as an underwriter in the primary market and received an underwriting spread.
- DThe firm acted as a clearing depository and charged a custodial settlement fee.
Cevap
The firm acted as a dealer in a principal capacity and charged a mark-up.
When a broker-dealer executes a secondary market trade by filling a customer order using its own inventory, it acts in a principal (dealer) capacity. In principal transactions, the firm adjusts the price to include a mark-up when selling to a buyer, or a mark-down when purchasing from a seller.
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Anahtar Kavram
Broker-Dealer Capacity and Compensation in Secondary OTC Markets