Market Participants

Broker

an individual or firm which operates between a buyer and a seller and usually charge a commission. For most products a licence is required.

Dealer

an individual or firm which buys and sells for its own account.

Broker/dealer

an individual or firm buying and selling for itself and others. A registration is required.

Principal

a role of broker/dealer when buying or selling securities for its own account.

Market maker

a brokerage or bank that maintains a firm bid and ask price in a given security by standing ready, willing, and able to buy or sell at publicly quoted prices (called making a market). These firms display bid and offer prices for specific numbers of specific securities, and if these prices are met, they will immediately buy for or sell from their own accounts.

Market makers are very important for maintaining liquidity and efficiency for the particular securities that they make markets in. At most firms, there is a strict separation of the market-making side and the brokerage side, since otherwise there might be an incentive for brokers to recommend securities simply because the firm makes a market in that security.

Specialist

a stock exchange member who makes a market for certain exchange-traded securities, maintaining an inventory of those securities and standing ready to buy and sell shares as necessary to maintain an orderly market for those shares. Can be an individual, partnership, corporation or group of firms.