Principal trade

Principal trade

A principal trade occurs when a brokerage house buys securities on the secondary market with the express strategy to hold long enough for a price appreciation. At that point the broker sells retails to the end use and gains appreciation plus commission. Brokers are required to notify when they provide a principal trade, though will typically obfuscate the fact through the fine print. The broker always seeks to sell their inventory to prospective buyers rather than buying new into the market. Common in bond sales.


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