Role of Market Participants
Chapters in this video
- 0:00 Who takes your money when you tap "buy"
- 1:03 Introducing broker-dealer: the waiter who never cooks
- 1:52 Clearing broker-dealer: the kitchen, vault, and DTCC member
- 3:36 Market makers: the garage inventory and the bid-ask spread
- 4:59 Exchanges: centralized order matching and price transparency
- 5:28 Rapid-fire exam recap
What this video covers
- The introducing broker-dealer's role: maintaining customer relationships and accepting orders, but never holding customer funds or securities
- The clearing broker-dealer's role as custodian: holding client assets, clearing and settling trades, sending confirmations and statements, and membership in the Depository Trust and Clearing Corporation (DTCC)
- Why an introducing broker-dealer offering to hold securities in a firm safe is a classic exam trap, and why only clearing broker-dealers may act as custodian
- Market makers trading as principal from their own inventory, not as agent earning commissions
- The bid-ask spread as the market maker's compensation and the two-sided quote requirement
- Why "bid-ask spread" and "two-sided quote" in a question are neon signs pointing to principal/market-maker activity, not agent activity
- Exchanges as centralized regulated marketplaces providing price transparency, fair and orderly trading, and order matching
Read the full lesson, free
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