What is a broker-dealer?

A broker-dealer is primarily defined as a firm that engages in the buying and selling of securities. This role is crucial in the financial markets, as broker-dealers act as intermediaries between buyers and sellers of stocks, bonds, and other financial instruments. They facilitate transactions, execute trades on behalf of clients, and often have access to a wide range of markets and services to ensure that trades occur efficiently.

Broker-dealers can operate in various capacities: as brokers, executing orders on behalf of clients, or as dealers, buying and selling securities for their own accounts. This dual role allows them to provide liquidity to the market, making it easier for investors to buy or sell securities when needed.

The other options do not accurately represent the primary function of a broker-dealer. Offering insurance products pertains to insurance companies, providing financial advice is more typical of financial advisors or planners, and managing hedge funds is specific to investment management firms that invest pooled capital in various assets. Each of these services is distinct from the core operations of a broker-dealer, which centers on facilitating the trading of securities.