Broker vs. Dealer

The difference between a broker and a dealer

When dealing with securities, two of the job functions involved are that of a broker and a dealer. On the surface it may appear that they are one and the same, but there are differences between them.

What is a broker?

A broker does not have a high level of experience in dealing with securities and this person charges a commission for completing the transaction for you. He does not have the right to freely buy and sell securities for a client. He can only do so when the client requests it. He performs trades on behalf of the client.

What is a dealer?

A dealer has a lot of experience in buying and selling securities. A broker will eventually become a dealer. However, a dealer does not collect a commission on the transactions he carries out for the clients and has the right to freely buy and sell on their behalf. He also buys and sells these securities on his own account, so in effect a dealer does trades on his own.

The difference between broker and dealer

Most dealers started out as brokers and both are businesspeople. The main difference between them is the way in which they operate. Both are aware of the stock market trends on a daily basis, but a broker only carries out transactions for the clients and they are his primary concern. Dealers focus on the trade rather than the clients.