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Guilherme Mazui

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What is the Difference Between Broker and Dealer?

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The main difference between a broker and a dealer lies in the way they facilitate the buying and selling of securities:

  • Broker: A broker is an individual or a financial services company that enables the trading of securities for other individuals or entities. They execute orders on behalf of clients and can be either a full-service broker or a discount broker. Brokers help clients buy and sell securities while overseeing their brokerage accounts.
  • Dealer: A dealer is an individual or a financial services company that enables the trading of securities for their own account. Dealers facilitate trades on behalf of themselves, as a company, or themselves as individuals. Some dealers, also called primary dealers, facilitate trades on behalf of the United States government.

There are also entities known as broker-dealers that perform both responsibilities, such as traditional Wall Street organizations and large commercial banks. Broker-dealers may be able to help bridge the gap between small businesses and potential investors, and they may be involved in raising capital, selling a company, or engaging in other types of liquidity transactions.

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  • What is the Difference Between Broker and Dealer?
  • Comparative Table: Broker vs Dealer

    • Comparative Table: Broker vs Dealer

    The main difference between a broker and a dealer lies in their roles in the trading process. Here is a comparison table highlighting the key differences:

    Feature Broker Dealer
    Definition A broker is an individual or financial services company that executes trades on behalf of clients. A dealer is an individual or financial services company that facilitates trades on its own behalf.
    Role in Trading A broker acts as an intermediary between buyers and sellers, making money by bringing together assets for them. A dealer trades securities for its own account, taking on the risk of holding inventory and trying to profit from the spread between the purchase and sale prices.
    Responsibilities Brokers execute orders on behalf of clients, either as full-service brokers or discount brokers, depending on the level of service needed. Dealers, sometimes called market makers, provide liquidity and ensure there is enough volume of trading for seamless transactions.
    Compensation Brokers primarily earn commissions or brokerage fees for executing trades on behalf of clients. Dealers earn profits from the difference between the prices at which they buy and sell securities.

    A broker-dealer is a entity that performs both broker and dealer responsibilities, such as traditional Wall Street organizations and large commercial banks.

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    Guilherme Mazui

    Guilherme Mazui is graduated in journalism from the Federal University of Minas Gerais (UFMG) and a master's degree in Communication from the University of São Paulo (USP). In addition, he has experience in advertising writing and has worked as a content editor in several companies.