How does banking actually work? Part 3: Dealers
Dealers provide liquidity in most financial markets. The dealers are those who connect sellers and buyers. This is through buying equity, bonds and even currency from those who want to sell them and selling them to those who want to buy them. They are some of the most important financial intermediaries in the world. How do dealers provide liquidity? A liquid market is "one in which an individual transaction does not disrupt the continuity of the market" Meaning that you can buy and sell quickly without having drastic changes in the price. This can be shown in terms of price very clearly. Dealers are vital in upholding the financial market’s liquidity. Dealers make it easier for someone to sell much more of the derivative without crashing the market. This is important as in the present-day banks and many other financial institutions confront their liquidity risk though being able to sell their assets, typically at a moment’s notice. Acting as the middleman, the dealers