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Broker-dealer: Difference between revisions
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An investment firm that acts both as a [[broker]] (or {{tag|agent}}) when it executes orders on behalf of clients, and also as a [[dealer]] (or {{tag|principal}}), when it trades for its own account. | {{anat|brokerage}}An investment firm that acts both as a [[broker]] (or {{tag|agent}}) when it executes orders on behalf of clients, and also as a [[dealer]] (or {{tag|principal}}), when it trades for its own account. | ||
The term {{tag|broker-dealer}} is used in US securities regulation (and in ISDA {{tag|netting}}) parlance to describe stock brokerages, because most of them act as both [[agent|agents]] and [[principal|principals]]. | The term {{tag|broker-dealer}} is used in US securities regulation (and in ISDA {{tag|netting}}) parlance to describe stock brokerages, because most of them act as both [[agent|agents]] and [[principal|principals]]. | ||
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Rule 15 (a)(1) provides in the gummed up lingo of a securities legistlator scarred by the Crash of 1929, as follows: | Rule 15 (a)(1) provides in the gummed up lingo of a securities legistlator scarred by the Crash of 1929, as follows: | ||
'''15 U.S. Code § 78o - Registration and regulation of [[brokers]] and [[dealers]]''' | '''15 U.S. Code § 78o - Registration and regulation of [[brokers]] and [[dealers]]''' | ||
(a) Registration of all persons utilizing exchange facilities to effect transactions; exemptions | (a) Registration of all persons utilizing exchange facilities to effect transactions; exemptions | ||
:(1) It shall be unlawful for any [[broker]] or [[dealer]] which is either a person [[other than]] a natural person or a natural person not associated with a broker or dealer which is a person other than a natural person (other than such a broker or dealer whose business is exclusively intrastate and who does not make use of any facility of a national securities exchange) to make use of the mails or any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security (other than an exempted security or commercial paper, bankers’ acceptances, or commercial bills) unless such broker or dealer is registered in accordance with subsection (b) of this section. | :(1) It shall be unlawful for any [[broker]] or [[dealer]] which is either a person [[other than]] a natural person or a natural person not associated with a broker or dealer which is a person other than a natural person (other than such a broker or dealer whose business is exclusively intrastate and who does not make use of any facility of a national securities exchange) to make use of the mails or any means or instrumentality of interstate commerce to effect any transactions in, or to induce or attempt to induce the purchase or sale of, any security (other than an exempted security or commercial paper, bankers’ acceptances, or commercial bills) unless such broker or dealer is registered in accordance with subsection (b) of this section. | ||
This boils down, to the [[JC]]’s unqualified eye, to say: ''“it is illegal for any [[broker/dealer]] to effect any transaction in a security or of induce any purchase or sale, if it is not a [[registered broker-dealer]] under Section 15(b) of the [[Securities Exchange Act of 1934]]”'' | This boils down, to the [[JC]]’s unqualified eye, to say: ''“it is illegal for any [[broker/dealer]] to effect any transaction in a security or of induce any purchase or sale, if it is not a [[registered broker-dealer]] under Section 15(b) of the [[Securities Exchange Act of 1934]]”'' | ||