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Current entry is inaccurate.
In a principal trade a broker transacts directly with the customer. Customer buys <--> broker sells; or, customer sells <--> broker buys. In an agency transaction, a broker is a party to the transaction.
In an agency trade a broker transacts on behalf of a customer. The broker but is not a party to the transaction. In an agency transaction, a broker is an intermediary between a customer and a third party.
Usage example:
Principal trades involve the brokerage firm and a client (principal/client trade), while agency trades involve two clients of the brokerage firm (client/client trade).[1]
--Krkeane (talk) 17:18, 14 February 2018 (UTC)
- ^ Smith, Brian F., D. Alasdair S. Turnbull, and Robert W. White. "Upstairs market for principal and agency trades: Analysis of adverse information and price effects." The Journal of Finance 56.5 (2001): 1723-1746.