There are a lot of different players in any transaction. The process of buying and selling securities often involves more than just a buyer and a seller. There can be many parties working behind the scenes.
Once you set up and fund a brokerage account, it is very easy to call your broker or place an order online. Within seconds your order is confirmed. However, the actual execution is a lot more complex.
Your broker is most likely working with a clearing broker, who plays an important role to ensure the trade is settled correctly and that the proper records are kept. Your broker will send your cash and securities to a clearing broker to clear the trade. The clearing broker then works with a clearing corporation that matches and settles trades and handles the confirmation and delivery of the transactions.
One of the main jobs of a clearing broker is to confirm all the information given regarding the trade is correct. But their most important role is to manage the funds involved for each transaction. They maintain custody of the investor’s securities and other assets such as cash in the account. Since only about 5% of retail brokerage firms are self-clearing, most work with a clearing broker.
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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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