Dealers are significant financial figures in the investing world. They give investors, both institutional and retail, advice on investments, create markets in securities, and deliver investment related services. So dealers are essentially the marketplace makers who give you the ask and bid prices you see when you search for a particular security on the over-the-counter marketplace. Traders do not actually hold the securities; instead, they facilitate the process by acting as intermediaries.
A dealer will be an intermediary between you and the listed security holder, either through his or her broker or through a clearinghouse. The dealer buys and sells securities for you from an existing brokerage firm or from an independent financial professional such as yourself. Many people think of a bank or other large institution when thinking about banks buying and selling securities. However, there are several independent financial professionals that also buy and sell securities and their services are much the same as those offered by banks.
When you buy or sell securities through a dealer, you will be dealing directly with the dealer, which could be your broker or another independent financial professional. When you buy shares directly from a dealer, you will find that the dealer will take care of all the necessary paperwork required for you to trade in that particular security. Your broker will not have access to the information provided by the dealer and will not offer any advice regarding the purchase and sale of shares.
Some brokers and dealers also act as representatives on behalf of their clients. In this role, they would secure for you shares on the basis of what the brokerage firm may decide is the appropriate price to set for those shares. There is also some risk of trading against the dealer. If the broker determines that the share is undervalued, you could experience a loss on the transaction. If the brokerage firm decides that the shares are overvalued, you may lose on the deal.
There are different types of brokers and dealers in the securities market, including discount brokers and full-service brokers and dealers. A discount broker usually works for a commission and will only provide you with advice as to the right price to pay for certain shares. This type of broker is useful when you only need advice on one or few companies and do not require regular access to the securities market. A full service broker on the other hand will allow you to trade in any company in the industry, as well as provide you with guidance on buying and selling securities.
The main advantage of working directly with brokers and dealers is that you will gain the benefit of their expertise. You can find out the price range for a company by inquiring directly with the dealer. Once you have the range of prices known, it is easier to place the order with the dealer. You can use a discount broker or a full service broker for buying and selling securities. This will depend largely on your personal preference. In addition, you should also consider whether to work with a dealer or broker or whether you would rather carry out your trades independently.