It's like a middleman between two larger financial institutions. The inter-dealer broker fills in the space when two organizations (like investment banks) want to trade something that doesn't have a structured market.
Global Bankers Mart, LLC wants to buy a cache of rare dinosaur egg fossils from Capital Investment Corp. GBM sees big upside in the fossilized egg market, and their Dino Long Fund has been looking for investments. However, the transaction is tricky, because unlike a stock, there's no current exchange where dino eggs get traded (apparently, the CME hasn't gotten in on that action yet).
So you step in as the inter-dealer broker. You become the intermediary in the deal, creating the bridge for the companies to close the transaction. The eggs get sent to GBM, and Capital Investment Corp. gets a wad of cash. You take a small commission for facilitating the deal.
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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]
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