Those who buy or sell securities on their own behalf are known as dealers. A dealer acts as the authority in trading for their own account meaning that they do not need a broker to facilitate transactions as they execute their desired orders themselves. Dealers, like brokers, play an important role in the market. They underwrite securities and provide liquidity and investment services to investors. This allows such individuals to act as liquidity providers who can generate bid and ask quotes for those wishing to consult the market when searching for the price of a security. They also help boost long-term growth.
Dealers who specialise in the securities market stand ready and open to buy (at bid price) or sell (at ask price) securities to/from their own. A dealer’s main goal is to make a profit from the spread between the bid and ask prices, while also contributing to increased liquidity within the market. A dealer works completely on their own behalf and neither facilitates transactions between parties nor does business on behalf of another person.
There are also individuals who decide to act as brokers as well as dealer, and they are referred to aptly as broker-dealers. Firms or individuals who operate as broker-dealers do so when the market conditions allow for it while also taking into consideration the size, type, and security involved in a particular transaction.
A dealer will usually charge a mark-up when selling from his or her own portfolio as the dealer is a principal in the account and therefore looking to make a profit.