When a broker-dealer sells you securities out of its inventory, the broker-dealer acts as a principal in the transaction (that is, selling to you directly the securities it holds). When acting in a principal capacity the broker-dealer generally will be compensated by selling the security to you at a price that is higher than the market price (the difference is called a markup), or by buying the security from you at a price that is lower than the market price (the difference is called a markdown).
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Read our investor alert on the significant risks of short-term trading based on social media.
Know the Risks of Day Trading
Read this Director’s Take article to understand the risks of engaging in this type of speculative investing.
Investing Quiz – May 2021
Test your knowledge on common investing terms and strategies and current investing topics.