what is principal trade? are they not the same as crossing net trade only that crossing seem to be electronic ? and what are the difference between agency trade and broker trade ? thanks in advance.
Principle trade is when the broker-dealer acts as dealer, selling from its own inventory; or buying your order using their own capital. Agency and broker trade are similiar, your broker-dealer is acting as broker, trying to find the other side of the trade for you. One more difference, for principle trade, you are charged a mark-up; for agency or broker trade, you are charged with a commission. Help??
I have to add to this. Principal trade is conducted by a dealer (which could include b.d.) for their own accounts. Think of people running their own money. Often they have to step in to the market to provide liquidity and thus risk holding inventory (vice versa). ECNs are electronic - and cross periodically depending on the ECN. Some are batch (bids and asks are accumulated) and orders are crossed based upon the supply and demand on each side of the trade along with price parameters. ECNs can also be continuous markets - Archipelago (sp?). The benefits of ECNs are anonymity, especially if you are routing a larger order and don’t want to experience any market impact of your trade.
ws, value addict, So many thanks, it has been bugging me for some time. glad I asked. thanks again for prompt reply.