An agent acts as a go-between and receives a commission for their services. The traditional role of the stock broker who brings buyers and sellers together and receives a commission is a good example of an agent.
A dealer acts on behalf of their firm rather than acting as a go-between. So rather than matching up buyers and sellers, the dealer acts as a principal and is buying or selling stock for the dealer’s own inventory. So when you buy a bond from your dealer, it’s likely that the dealer is selling you bonds that the dealer owns. The dealer makes money by selling securities for a higher price than they paid.
Published August 10, 2006 . Filed under: Lesson 1.3