CISI CMP Securities Practice Questions - CISI Capital Markets Programme - Securities Exam

What distinguishes a 'principal' trade from an 'agency' trade?

A principal trade is always larger than an agency trade In a principal trade the firm trades from its own book and takes on risk; in an agency trade the firm acts on behalf of a client without taking a position A principal trade involves only bonds; an agency trade involves only equities There is no difference in modern markets

Correct Answer:

In a principal trade the firm trades from its own book and takes on risk; in an agency trade the firm acts on behalf of a client without taking a position

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