In the context of sell-side equity revenue, when a dealer acts as anagentfor a client’s trade, the revenue is typically earned as acommission. The dealer facilitates the trade between buyers and sellers without taking ownership of the securities, earning fees for providing this service.
Commission: Earned when the dealer acts as an agent.
Spreads: Earned when the dealer acts as a principal, buying securities at one price and selling at a higher price.
Fees: Charged for additional services, such as research or analytics.
Interest: Earned from financing activities or margin accounts, not directly tied to trading.
A. Fees: Incorrect; fees are typically charged for services, not for acting as an agent.
B. Spreads: Incorrect; spreads are earned when the dealer acts as a principal.
C. Interest: Incorrect; interest revenue is unrelated to acting as an agent.
D. Commission: Correct answer. Acting as an agent involves earning commissions for facilitating trades.
Types of Revenue in Sell-Side Trading:Explanation of Options:References:
CSC Volume 2, Chapter 27: The Role of Sell-Side Dealers, which details revenue models in institutional and retail trading.
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