Market Makers
A broker-dealer executes a trade from its own inventory for a customer. In this transaction, the firm is acting as:
When a firm trades from its own inventory (buys from or sells to a customer), it acts as a principal (dealer). The compensation is a markup (selling) or markdown (buying). When acting as agent (broker), the firm facilita
Complete Analysis & Legal Rationale
When a firm trades from its own inventory (buys from or sells to a customer), it acts as a principal (dealer). The compensation is a markup (selling) or markdown (buying). When acting as agent (broker), the firm facilitates trades between parties and earns a commission.
Distractor Autopsy (Why Other Options Are Traps)
FINRA exam writers design incorrect distractors using specific calculation mistakes and regulatory misconceptions. Review why each option succeeds or fails:
Does not match the governing securities rule described in the explanation.
Matches the verified teaching point in the explanation.
Does not match the governing securities rule described in the explanation.
Does not match the governing securities rule described in the explanation.
Official Standard: Fair pricing / commissions standards for member transactions (verify current text).
Official Standard: Outline-level citation: item maps to Series 7 topic coverage. Prefer a specific FINRA/SEC/MSRB rule citation in a later author pass.