A sell-side trader who sells exchange services to buy-side firms (such as investment managers and institutional investors) in return for trading profit (i.e., bid-ask spread– they provide when they buy low and sell high). Dealers stand ready to buy or sell securities when approached by buy-side traders, and hence they provide liquidity to the market. Furthermore, dealers help their buy-side clients take informed decisions on upgrades, downgrades, target prices and provide them with research-based consultancy. Typically, dealers trade for their own account and risk. When buying from a dealer, a client receives securities from the dealer’s inventory.

One of the biggest concerns of dealers is trading with a better-informed counterparty. That makes them particularly keen to spot active counterparties in the market, to know how much information traders do have, and to determine how urgent their impetus to have access to exchange services is, in order to manage profits and risk (such as adverse selection risk).

Exchange laws usually stipulate that a dealer must maintain net capital of not less than a specific minimum amount.