Which one of the following statements concerning dealers and brokers in the financial markets is correct?
A)A broker never assumes ownership of the securities being traded.
B)A dealer pays the ask price when purchasing securities.
C)A broker earns income in the form of a bid-ask spread.
D)A dealer in market securities arranges sales between buyers and sellers for a fee.
E)A broker deals solely in the primary market.

Question

Quizplus · Accepted Answer

Brokers act as intermediaries between buyers and sellers without taking ownership of the securities, earning their income through commissions or fees for their services, not through the bid-ask spread. Dealers, on the other hand, buy and sell securities for their own accounts, at their own risk, and make money on the bid-ask spread. They offer the ask price when selling securities, not when purchasing. Dealers also do not solely arrange sales between buyers and sellers for a fee; that's the role of a broker. Brokers can operate in both primary and secondary markets, not just the primary market.

Which One of the Following Statements Concerning Dealers and Brokers