by any chance, client directed brokerage most happen with pension fund through principal trade? or is there any relationship between client directed brokerage with principal trade? Thanks.
Can someone explain in simple terms what is the difference between the two? Which one would a broker prefer?
Agency Trade- The broker does not own the asset. He just executes the order acting as your agent. Principal Trade- Broker buys or sells securities from own accounts. Hope that answers it.
Thanks! That was simple. That means the broker takes the risk on his balance sheet when he is doing a principal trade and hence he should think of doing wrong things which will benefit his principal trades rather than agency trades. Correct?