6 The market participants, facilitators, and influencers


There are vast numbers of organizations and people that participate directly in the stock markets through investment and trading activities.  There are many more who facilitate activities and earn fees and commissions from the direct participants. Some also provide advisory services.

In addition, there are large numbers of analysts, commentators, journalists, and websites that influence the markets. Knowledge of these actors and how they behave and interact is important background to successful investing. This chapter attempts to describe them in an organized way, and includes many key words which should aid deeper research by the interested reader.

Economics and accountancy are probably the main disciplines of the markets, though people from virtually every background and education are drawn by the opportunities and excitement to be found there.

Dealers, brokers, and broker-dealers

In the context of shares (also known as equities), a dealer is a person, or more likely a firm, that deals in shares for its own account, sometimes through a broker.

Brokers trade on behalf of their clients for a commission. For trading on public stock exchanges, their main role will be to find the best price on offer for the client’s trade size, to execute the trade, and then to oversee the post-trade clearance and settlement.  Where a broker acts as agent for a client, he will carry the counterparty responsibility, i.e., to deliver the shares or cash.

A broker-dealer is usually a firm that acts as a broker as well as a dealer.  Broker-dealers play a central role in equity markets, either as an independent firm or as an operation of a larger organization, such as an institutional investor or an investment bank.  They deal using their own funds or on behalf of clients, and must keep a clear separation between their funds and those of their clients.  In addition to trading or dealing for clients, they may provide them with investment advice and undertake research for them. […]