Canadian Securities Course (CSC) Level 1 Practice Exam

What is the role of inter-dealer brokers?

1. Execute trades only for institutional buyers

2. Act as intermediaries in the retail bond market

3. Provide trade execution services to retail investors

4. Bring together institutional buyers and sellers

The correct answer is: Bring together institutional buyers and sellers

Inter-dealer brokers primarily serve as intermediaries facilitating transactions between institutional buyers and sellers. Their role is to match buy and sell orders from various market participants, which helps ensure liquidity and efficiency in the market. They typically do not engage directly with retail investors, but instead focus on handling trades for larger entities such as investment firms and banks. In contrast, executing trades exclusively for institutional buyers is a narrower function that does not encompass the full role of inter-dealer brokers. They also do not concentrate solely on the retail bond market or provide services directly to retail investors, as their operations are distinct from those of retail brokers who assist individual clients.