The London Stock Exchange uses cookies to improve its website. The cookies for analytical purposes have already been set. For more details and how to manage cookies, please see our privacy and cookies policy.

Brokers and Dealers


Brokers trade on behalf of their clients and profit by charging clients a commission. Brokers arrange trades their clients want to make by finding other traders who will trade with their clients. On electronic order driven market this research is easy thanks to the availability of the order flow. Brokers have to find the best trading venue able to satisfy their clients’ needs in terms of liquidity and quantity.

A broker act as an agent, in its own name, on the client’s account. As a consequence, the broker is responsible for delivering either cash or securities if a customer fails to do so: these intermediaries must stand behind their customers ----> Brokers bear the risks involved in order routing (e.g. IT glitch that could result in an order to be lost or misdirect) and post trade clearance and settlement.



Dealers trade on proper/principalaccount and profit when they buy low and sell high. On a dealer market, they accomodate traders that their clients want to make by trading with them when their clients want to trade. On an order driven market, they partecipate to building the order book and the order flow.

The unique risk borne by dealers is the exposure to price changes that they face when carrying unbalanced inventory positions that are acquired in the process of trading with their costumers.



Brokers Dealers firms act in dual capacity, both as a broker (agency or customer account) and as a dealer (proper, principal or own account). Under the same firm, these two roles must be strictly separated because the customer risk and the firm’s own risk must be duly separated to prevent a broker-dealer firm from shifting risk, either by intent or inadvertently, to is customers.

Back to key players of a market place

Back to Equity Section

Back to Forex Section

 

 

 

logo academy

The Exchange accepts no responsibility for the content of the website you are now accessing or for any reliance placed by you or any person on the information contained on it.

By allowing this link the Exchange does not intend in any country, directly or indirectly, to solicit business or offer any securities to any person.

You will be redirected in five seconds.

You are accessing the London Stock Exchange Annual Report Service powered by PrecisionIR.

The Exchange accepts no responsibility for the content of the reports you are now accessing or for any reliance placed by you or any person on the information contained therein.

By allowing this link the Exchange does not intend in any country, directly or indirectly, to solicit business or offer any securities to any person.

You will be redirected in five seconds