An entity that purchases and sells securities on its own behalf is acting as:
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A. B. C. D.B
An entity that purchases and sells securities on its own behalf is acting as a dealer. Therefore, answer B is correct.
Here's a more detailed explanation of each term:
Broker: A broker is an individual or firm that acts as an intermediary between buyers and sellers. Brokers facilitate trades by finding counterparties and arranging transactions. They typically receive a commission for their services. Brokers do not take positions in securities; instead, they act on behalf of their clients.
Dealer: A dealer is an individual or firm that buys and sells securities for its own account. Dealers earn a profit by buying securities at a lower price and selling them at a higher price. They may also earn a profit from the bid-ask spread, which is the difference between the price at which they are willing to buy a security and the price at which they are willing to sell it.
Agent: An agent is an individual or firm that acts on behalf of another party. In the context of securities trading, an agent may be a broker who acts on behalf of a client. The agent does not take positions in securities, but instead acts to execute the client's trades.
Principal: A principal is an individual or firm that trades securities for its own account. This term is often used synonymously with "dealer." However, it can also refer to a party who takes a principal position in a transaction, such as a seller who owns the securities being sold.
In summary, while brokers and agents act on behalf of their clients, dealers and principals trade securities for their own account. Therefore, the entity that purchases and sells securities on its own behalf is acting as a dealer, making answer B the correct option.