An attempt by a market maker to earn a profit on the price movements of securities by taking inventory positions for its own account is called

Question

Quizplus · Accepted Answer

The practice described in the question is known as a principal transaction, where a market maker, acting as a principal or dealer, takes positions in securities for its own account in an attempt to profit from price movements. This differs from agency transactions where the market maker acts as an agent for a buyer or seller, and best efforts underwriting which involves selling securities on behalf of an issuer. Risk arbitrage and pure arbitrage involve different types of trading strategies.

An Attempt by a Market Maker to Earn a Profit