Market Makers
Dealers that stand ready to buy and sell a security for their own account on a continuous basis, quoting a firm bid and ask price and providing liquidity to the market.
The SIE tests this with a capacity question: a firm trading from its own inventory and charging a markup/markdown (not a commission) answers dealer/principal, never agent. The same firm can be dually capable — selling stock it owns makes it a dealer (market maker), while merely arranging a trade between two clients for a commission makes it a broker (agent) — but it cannot do both on the same trade. Watch for the words inventory or spread: both point to a market maker.
Don’t confuse this with the broker-dealer-vs-adviser line — advisers charge fees for advice; market makers quote prices, they don’t advise. Another trap: market makers work the secondary market (existing shares), not the primary market where the issuer gets the proceeds. And note the oversight point — neither the SEC nor FINRA sets or guarantees a quote’s price; market forces do that. Their rules only make a displayed quote firm (no backing away). Hook: maker = inventory, spread, principal.
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