Executing broker: Difference between revisions
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To be contrasted with a {{tag|prime broker}}, an executing broker is a good old fashioned share broker, who accepts orders from clients to buy or sell securities. It may act as [[agent]], [[principal]], or [[riskless principal]], and you may lose many hours of your life to the fruitless quest for knowledge should you enquire as to what the difference is between these statuses, and why it should matter. | {{a|brokerage|}}To be contrasted with a {{tag|prime broker}}, an executing broker is a good old fashioned share [[broker]] (or [[dealer]]), who accepts (or [[broker-dealer]]) orders from clients to buy or sell [[securities]]. It may act as [[agent]], [[principal]], or [[riskless principal]], and you may lose many hours of your life to the fruitless quest for knowledge should you enquire as to what the difference is between these statuses, and why it should matter. | ||
=== | Do you want to know what the difference between a broker, a dealer, and a broker-dealer is? You do, don’t you. You’d be disappointed if you found out. But find out you can, by clicking here - at your own risk of disappointment. | ||
*[[broker-dealer|what is the difference between a broker, a dealer, and a broker-dealer?]] | |||
===Broker capacity=== | |||
Why it should matter: | |||
*'''Tax''': Where [[stamp duty reserve tax]] is payable on equity transactions, a recognised [[intermediary]] may have an exemption where it is buying as a principal. (where it on-sells to a customer, [[SDRT]] will be payable; if it transacts “[[on swap]]”, [[SDRT]] may not be. | |||
*'''Conflicts of interest''': Both the [[Investment Advisers Act]] of 1940 and [[ERISA]] contain sanctions with varying degrees of severity for discretionary investment managers who should transact for their clients with affiliated [[broker-dealer]]s | |||
*'''[[Give-up]]s''': How a trade is executed may have an impact on how it is given up. | |||
===[[Synthetic equity]]=== | |||
The difference between a cash trade and an equity bought “[[on swap]]” - also known as a “[[contract for differences]]” or “[[CFD]]”. This is particularly important for tax purposes. | |||
{{sa}} | |||
*{{tag|prime broker}} | *{{tag|prime broker}} | ||
*[[agency]] | |||
*[[principal]] | |||
*[[riskless principal]] | *[[riskless principal]] | ||
Latest revision as of 18:47, 6 January 2021
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Brokerage Anatomy™
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To be contrasted with a prime broker, an executing broker is a good old fashioned share broker (or dealer), who accepts (or broker-dealer) orders from clients to buy or sell securities. It may act as agent, principal, or riskless principal, and you may lose many hours of your life to the fruitless quest for knowledge should you enquire as to what the difference is between these statuses, and why it should matter.
Do you want to know what the difference between a broker, a dealer, and a broker-dealer is? You do, don’t you. You’d be disappointed if you found out. But find out you can, by clicking here - at your own risk of disappointment.
Broker capacity
Why it should matter:
- Tax: Where stamp duty reserve tax is payable on equity transactions, a recognised intermediary may have an exemption where it is buying as a principal. (where it on-sells to a customer, SDRT will be payable; if it transacts “on swap”, SDRT may not be.
- Conflicts of interest: Both the Investment Advisers Act of 1940 and ERISA contain sanctions with varying degrees of severity for discretionary investment managers who should transact for their clients with affiliated broker-dealers
- Give-ups: How a trade is executed may have an impact on how it is given up.
Synthetic equity
The difference between a cash trade and an equity bought “on swap” - also known as a “contract for differences” or “CFD”. This is particularly important for tax purposes.