What is the role of securities firms in investment intermediaries?
Securities firms assist within the trading of existing securities into the secondary markets. The two major categories of securities firms are as follows:
a. Brokers: These are agents of investors who match buyers along with sellers of securities. Brokers earn a commission for their service;
b. Dealers: These are agents who link buyers and sellers from buying and selling securities. Dealers hold inventories of securities, and sell such securities for a little higher price than they paid for them. Therefore they earn the bid-ask spread, the dissimilarity between the best ask (lowest price charged for instant purchase of stock) and better bid (highest price received for an instant sale of a unit of stock).