When Montone trades, he transacts through an intermediary. Normally, he buys shares controlled by the intermediary, who in turn purchased them from someone else. Montone trades in: A) a quote-driven market. B) a brokered market. C) an electronic crossing network. Your answer: B was incorrect. The correct answer was A) a quote-driven market. Order-driven markets do not use intermediaries, as traders deal directly with each other. Electronic crossing markets are a type of order-driven markets. In brokered markets, the broker finds counterparties for each trade. In a quote-driven market, market makers generally hold inventories of stocks for sale. (Study Session 16, LOS 44.c) Comment: So, I understand why A is a correct answer, the market maker is the “intermediary”, but couldn’t a Broker who finds counterparties also be considered an “intermediary”?
Key word is “who in turn purchased them from someone else”. A broker does not buy and sell from his own account but act as an agent only. If he does, he is a dealer. Pg 17 v6