Roles in Securities Trading
Chapters in this video
- 0:00 Broker versus dealer: one trade, one capacity, one fee
- 1:58 Introducing firm versus clearing firm: the storefront and the vault
- 4:43 Fully disclosed versus omnibus: how the vault organizes assets
- 5:16 Custodian: what they do and the no-advice trap
- 5:51 Market makers: bid-ask spread profit and the NYSE DMM versus NASDAQ distinction
- 7:38 Exchanges as self-regulatory organizations under SEC oversight
- 8:15 The complete trade path: from investor to settlement
- 8:50 Rapid-fire exam recap
What this video covers
- Why a broker-dealer can act as a broker (agent, commission) on one trade and a dealer (principal, markup) on another, but never both on the same transaction
- How an introducing firm holds the customer relationship while a clearing firm holds the assets, executes settlement, extends margin, and issues statements
- Why an introducing firm faces lower net capital requirements: not holding customer cash or securities earns a regulatory capital discount
- The difference between a fully disclosed arrangement (clearing firm knows each customer identity) and an omnibus arrangement (customers are held in a single combined account)
- What a custodian does (holds and safeguards assets, handles settlement and record-keeping, provides reporting) and the critical trap that a custodian never makes investment decisions
- Why market makers profit from the bid-ask spread rather than commissions, and the exam distinction between one designated market maker (DMM) per NYSE-listed security versus multiple competing market makers on NASDAQ
- What makes an exchange a self-regulatory organization (SRO) rather than a government agency, and how exchanges operate under Securities and Exchange Commission (SEC) oversight
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