What is a Dealer Market?
Dealer markets are markets that differ from the general investment markets, in that traders who focus on particular commodities engage in buying and selling activity using their own accounts rather than being represented by a third party. Securities dealers who make use of a dealer market are often referred to as Market Makers. In this type of trading environment, the buyers and sellers make use of their own resources in order to conduct trading. A dealer market is different from an auction market. With auction markets, there is usually one specialist who functions as the gatekeeper for incoming orders to buy and sell. Essentially, the specialist works out of one location and matches the buying and selling orders as they come in. Their sole function is to process the orders. This means a specialist in an auction market does not perform such functions as researching the market trend or providing sales support to investors. A specialist functioning in an auction market is also limited to
A dealer market is where traders for specific securities engage in buying and selling activity using their personal accounts to conduct trading, rather than being represented by a third party, creating liquid markets. A dealer market allows the traders to make use of their own resources to conduct trading activity, do research, and provide support to their investor customers. The benefit of this type of market is the quick access that investors have to buyers and sellers of a particular security meaning a greater opportunity to earn a higher return or minimize loss on any given investment. Dealers are able to move quickly to process orders to buy and sell and interact freely when it comes to research and other key functions. Dealers have to meet strict requirements in order to participate in a dealers market including compliance with regulations that govern their continued participation in the market.
