Dealer Market
Categories: Banking, Accounting
Ever find yourself searching for dog food in your local stores only to find your preferred brand out of stock, and the store at the mall 45 minutes away wants to charge $5 more? You then look at Amazon or Chewy.com and find the same brand $2.50 cheaper than you normally pay, including shipping.
That is the power of a dealer market.
One of the egalitarian aspects of platforms like Amazon and eBay is that they are both relatively free market dealer markets, and there are no outside third parties that are intervening in price fixing (at least as far as we know). Sellers compete on quality, speed of delivery, and price. A dealer market in the financial world is one where the dealer uses their own capital as a principal to be a direct market maker, posting bids and offers on various securities to offer liquidity to the market.
The competition among dealers allows for the highest bids for sellers and the lowest offers for buyers. Dealers trade directly with other dealers, so the bid/ask spreads are transparent and competitive. Forex and futures markets are representative of a dealer market. Quotes from brokers, such as a TD Ameritrade or eTrade, are broker markets, so the spreads will be a bit wider to account for their mark ups.
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Finance: What is a Broker-Dealer?16 Views
Finance a la shmoop.. what is a broker-dealer? It's one of [Homeless guys holding help signs]
these guys who's making less than minimum wage right no that'd be a broke
dealer and you won't find too many of them in Lake Tahoe but yeah a broker is [Man talking about broker-dealers in Lake Tahoe]
just someone who takes a commission for selling stuff they live wherever there
are transactions in cars, boats, planes, homes and securities like stocks and
bonds so yeah it's a broker - dealer sort of like a writer-director
sexual deviant in Hollywood... Key takeaway here the broker dealer brokers
securities ie they take a commission and they deal in securities like they carry [People playing blackjack]
their own inventory of ten million shares of Amazon this week's selling
them for twelve hundred ninety dollars and 32 cents a share and buying them for
twelve hundred eighty eight dollars seventy nine cents a share making a
spread of...
equals a dollar fifty-three a share the dealer makes a spread of a buck fifty [Dealer and market transferring cash and stock]
three every time she trades a share of the Walmart killing behemoth yeah it's
sort of a Goliath slaying Goliath story there that Amazon Walmart thing we're
watching it so think about broker-dealer making money on both sides of the trades
that's the way to go if you're going to Wall Street make money no matter what [Man walking on Wall Street]