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Riskless principal: Difference between revisions
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===The way I look at it=== | |||
An Intermediary acts as [[Riskless Principal]] if, acting at Buyer’s request, it purchases an Asset from Seller for its own account (Principal Purchase), records the Asset in its own trading books and (whether or not immediately) sells it to Buyer (the Principal Sale), either at the same price (with a commission) or at a mark-up or mark-down (with no commission). See | |||
Settlement capacity as against Transaction below. | |||
*As against Seller, Riskless Principal acts on its own behalf and not for Buyer. | |||
**There is a contract for the Principal Purchase between Seller and Riskless Principal, and therefore the Riskless Principal reflects the Assets in its own trading book. | |||
**There is a contract for the Principal Sale between Riskless Principal and Buyer. | |||
*A Riskless Principal may be remunerated by means of either (i) a mark up or mark down between the Principal Purchase and the Principal Sale or (ii) a separate payment from Buyer to Riskless Principal which resembles a commission but is in fact not a commission. | |||
*There is no Commission payable on a Riskless Principal contract. | |||
====See also==== | |||
*[[Agent]] | |||
*[[Principal]] | |||
===The way the Americans look at it=== | |||
There are four ways an investment advisor might purchase securities for a client. | There are four ways an investment advisor might purchase securities for a client. | ||