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Riskless principal: Difference between revisions
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Depending on how you look at it, when it comes to [[equity brokerage]], a [[riskless principal]] is a kind of weird half-way house between a [[principal]] and an [[agent]]. | Depending on how you look at it, when it comes to [[equity brokerage]], a [[riskless principal]] is a kind of weird half-way house between a [[principal]] and an [[agent]]. | ||
*'''The legal view''': Legally, a [[riskless principal]] is just a [[principal]] with a feeble constitution: one of those indoorsy types who gets migraines and likes chess, and who only contracts with clients once he has arranged a contract with the market. Being a sookie, he arranges his life so that he bears no risk if the transaction goes wrong. | *'''The legal view''': Legally, a [[riskless principal]] is just a [[principal]] with a feeble constitution: one of those indoorsy types who gets migraines and likes chess, and who only contracts with clients once he has arranged a contract with the market. Being a sookie, he arranges his life so that he bears no risk if the transaction goes wrong. | ||
*'''The economic view''': A [[riskless principal]] is an [[agent]], but not the usual bookish sort | *'''The economic view''': A [[riskless principal]] is an [[agent]], but not the usual bookish sort: one who doesn’t mind getting her shoes wet, picks up hitch-hikers, goes mountaineering and gets in bar-fights. Even though she doesn’t take any risk when she fills a customer order, she’s happy to hold the stock as it passes through. | ||
===What is the difference between [[agency]] and [[riskless principal]]?=== | ===What is the difference between [[agency]] and [[riskless principal]]?=== | ||