What is Dealer?
In the securities market, the term "dealer" commonly refers to an individual or a corporate entity engaged in the buying and selling of securities. This activity can occur through a broker or directly for their own account. Dealers occupy a significant and indispensable position within the market structure. Unlike brokers, who primarily function as intermediaries, dealers operate as principals, executing trades for their own portfolios.
One of the dealer's major responsibilities is the facilitation of market liquidity. They play a distinctive role in this regard, distinct from that of brokers. Dealers are instrumental in ensuring the smooth functioning of the market and fostering long-term growth prospects. Their contributions are essential to maintaining a robust and dynamic financial landscape.
Dealer Explained
In the securities market, a dealer is a salient player that operates either as an individual or a firm. Their role is vital as they are always ready and willing to purchase a security for their own account at a designated bid price or sell from their own account at an assigned ask price. The preliminary aim of a dealer is to make a profit from the difference between the bid and ask prices, all while infiltrating liquidity into the market. It's noteworthy that a dealer doesn't act on behalf of clients or facilitate transactions between parties.
It's crucial to differentiate dealers from entities that simply facilitate trades between buyers and sellers. Dealers are distinct from traders as well. While a dealer conducts regular buying and selling of securities as part of their established business, a trader engages in the buying and selling of securities based on their personal account rather than as part of a business practice.
Challenges that have arisen for dealers in recent times owing to various factors. These include the need to embrace advanced technology to keep pace with the swiftly evolving markets, the trend of industry consolidation, and the heightened regulatory environment leading to increased compliance costs. Despite these challenges, dealers continue to play a significant role in the complex world of the securities market