Market Structure and Participants

An entity that creates and sells securities to raise capital (corporations, U.S. Treasury, municipalities, investment companies). Receives proceeds only in the primary market.

The U.S. government and municipalities — there is no stock in a city or the Treasury.

Executes trades for customers, never owns the security, and is paid a commission.

Trades from its own inventory for its own account; compensated by a markup/markdown or the bid-ask spread.

A dealer that continuously quotes both a bid and an ask in a security, standing ready to buy and sell.

A carrying/clearing firm holds customer cash and securities and self-clears; an introducing firm takes orders but pushes execution, custody, and bookkeeping to a clearing firm (fully disclosed clearing).

Provides consolidated custody, financing, and reporting to hedge funds that execute trades with multiple firms.

IAs owe a fiduciary duty (client first at all times); BD registered reps are held to Regulation Best Interest at the time a recommendation is made.

Generally SEC registration if AUM is $110 million or more; state registration if smaller (Investment Advisers Act of 1940).

Hired by the issuer to maintain records of security owners, issue/cancel certificates, distribute dividends and interest, handle lost certificates, and send proxies.

Audits the transfer agent, ensuring shares outstanding match shares authorized/issued.

DTCC is the clearing agency; NSCC handles clearing of trades and DTC serves as the central securities depository.