SIE practice questioneasyAgency Trades and Commissions
When a broker-dealer acts as an agent in a transaction, the firm charges the customer a:
- AMarkdown
- BMarkup
- CSpread
- DCommission✓ Correct answer
Explanation
Why D — Commission
When acting as an agent, the broker-dealer facilitates the trade between buyer and seller without using its own inventory. The firm charges a commission for this service. Markups (A) and markdowns (B) are charged when the firm acts as principal (dealer), buying from or selling to the customer from its own inventory. The spread (D) is the difference between bid and ask prices.
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