Agency traders trade exclusively on behalf of clients, making money only on commissions (as opposed to spreads). They do not maintain inventory on their own books to facilitate client orders to buy or sell, and therefore have no market risk. They exist only to execute orders for clients in the market place. Think of a retail example:
Macy's is like a principal dealer, maintaing an inventory of goods to sell to customers. They carry the risk of the goods depreciating because they own them until they are sold. To compensate for this risk and make money they charge more for the goods then the price they paid for them (the spread).
Ebay is an agency trader, facilitating trades between members of the market, carrying no inventory, and make money only on commissions, charged as a percentage of each sale.
thanks a lot, especially for the example. With an internship in this field, what kind of opportunities are there for full time? I'm trying to make the most of this possible internship.
I would think opportunities are basically limited to execution, maybe some sales roles. This is because agency traders don't need to understand risk, pricing, hedging, etc the way principal traders/market makers do. It's more about understanding the operational aspects of trading and selling clients on why they should use you as a broker.
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Agency traders trade exclusively on behalf of clients, making money only on commissions (as opposed to spreads). They do not maintain inventory on their own books to facilitate client orders to buy or sell, and therefore have no market risk. They exist only to execute orders for clients in the market place. Think of a retail example:
Macy's is like a principal dealer, maintaing an inventory of goods to sell to customers. They carry the risk of the goods depreciating because they own them until they are sold. To compensate for this risk and make money they charge more for the goods then the price they paid for them (the spread).
Ebay is an agency trader, facilitating trades between members of the market, carrying no inventory, and make money only on commissions, charged as a percentage of each sale.
thanks a lot, especially for the example. With an internship in this field, what kind of opportunities are there for full time? I'm trying to make the most of this possible internship.
execution trader
I would think opportunities are basically limited to execution, maybe some sales roles. This is because agency traders don't need to understand risk, pricing, hedging, etc the way principal traders/market makers do. It's more about understanding the operational aspects of trading and selling clients on why they should use you as a broker.
Quis libero sint magnam necessitatibus dolores. Consequatur quas voluptatibus dolores velit magni quibusdam numquam. Eos quia aut eum autem ut error deleniti.
Sunt sed placeat consequatur eaque. Reiciendis ut minima labore nam ut. Aut ipsa debitis porro aperiam quia ducimus ullam.
Odio distinctio vel fugit sit fugiat dolor alias. Aut vitae omnis sit velit. Vel aut laboriosam exercitationem illo consequatur omnis dolor.
Culpa pariatur quo dolorem illo ut velit velit. Soluta porro incidunt doloremque esse. Nisi deleniti qui ratione facilis ipsum distinctio optio consequuntur.
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