What is the difference between an agency and principal trade?
An agency trade is when a firm buys or sells a security on behalf of a client to a third party. They will usually collect a commission for this service. During this transaction the firm does not own the security itself.
A principal trade is when a firm buys or sells securities from their own account. Anytime the firm is buying or selling from within their own inventories, it is a principal trade.
-Will Storey.
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