Wholesale broker/dealers

A separate category of LSE broker is the broker/dealer. These are firms that act both for their own account or as agents for another party. Broker/dealers therefore trade with both market makers and client firms and can deal with clients either as principal or agent. Broker/dealers may also act as wholesale broker/dealers to GEMMs. 

Market professionals include the banks and specialist financial intermediaries mentioned above, firms that one would not automatically classify as investors, although they will also have an investment objective. Their time horizon will range from one day to the very long term. They include the proprietary trading desks of investment banks, as well as bond market makers in securities houses and banks who are providing a service to their customers. Proprietary traders will actively position themselves in the market in order to gain trading profit, for example, in response to their view on where they think interest rate levels are headed. These participants will trade direct with other market professionals and investors, or via brokers. Market makers or traders (also called dealers in the United States) are wholesalers in the bond markets they make two-way prices in selected bonds. Firms will not necessarily be active market makers in all types of bonds smaller firms often specialise in certain sectors. 

Dealers, often brokerage firms with large retail investor customer bases, purchase bonds in the wholesale or institutional marketplace in bulk. Once acquired, the large bond position must be subdivided and sold to numerous investors. If not all of the bonds can be sold immediately, the broker will hold the bonds in inventory until the position is completely liquidated. The dealer can inventory the bonds anywhere from a day to a few months, and this is the reason that retail bond spreads tend to be large. There is always the risk that the broker may have to hold the bonds in inventory for an extended period of time— hence, a large spread is typically "built" into the price. 

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See also in sourсe #XX -- [ ]

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