A client purchased 1,500 shares of stock from a broker-dealer, a registered market maker in this stock. The broker-dealer acted in a(n):

Complete Question:

A client purchased 1,500 shares of stock from a broker-dealer, a registered market maker in this stock. The broker-dealer acted in a(n):

Group of answer choices

a. Principal capacity and charged the client a markup

b. Agency capacity and charged the client a commission

c. Principal capacity and charged the client a commission

d. Agency capacity and charged the client a markup

a. Principal capacity and charged the client a markup.

Explanation:

In this scenario, a client purchased 1,500 shares of stock from a broker-dealer, a registered market maker in this stock. The broker-dealer acted in a principal capacity and charged the client a markup.

A market maker can be defined as an individual or organization such as a broker-dealer who is usually willing to trade (buy and sell) stocks. This simply means that, a market maker is engaged in the business of trading shares of stock.

Generally, in the trading of stocks a market maker actually acts in a principal capacity and could charge his or her clients either a markup or markdown.

A markup can be defined as the difference between the amount of money paid by a customer and the market price of a stock being held by a broker-dealer.

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