A broker-dealer is a financial entity that operates in a dual capacity: as a broker (executing trades on behalf of clients for a commission) and as a dealer (trading for its own account, known as proprietary trading). Broker-dealers must be registered with regulatory authorities such as the SEC and FINRA in the United States. They play a critical role in maintaining market liquidity by making markets in securities and facilitating the efficient flow of capital between buyers and sellers.
Example
“The broker-dealer firm earned revenue both from client commissions on equity trades and from profits on its own proprietary trading desk.”