What is a dealer
A dealer is a firm that trades on its own account, buying from and selling to clients from its own book, so that there is always a price to trade at. This is also called "making a market".
The dealer earns mainly from the spread, which is the gap between the price it buys at (bid) and the price it sells at (ask). It also carries the risk of the positions it holds.
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Worked example (hypothetical)
A forex dealer quotes a currency pair with a bid and a slightly higher ask.
- Client A sells the pair to the dealer at the bid.
- Soon after, client B buys the same amount from the dealer at the ask.
- If the price has not moved in between, the dealer keeps the bid-ask difference on that amount.
- If the price moves against the dealer before client B arrives, the dealer can lose on the position it held.
To put real numbers on a spread for a given lot size, use the tools on the calculators page.
Dealer vs broker
| Dealer | Broker | |
|---|---|---|
| Acts as | Principal, on its own account | Agent, on the client's behalf |
| Your counterparty | The dealer itself | Another market participant |
| Main income | Spread and positions | Commission or fee |
| Holds market risk | Yes | Usually no |
Many firms act in both roles and are called broker-dealers. On any single trade, the firm acts in one capacity, and the trade confirmation or client agreement should say which.
Formal definition and edge cases
In formal terms, a dealer acts in a principal capacity: it becomes the counterparty to your trade instead of passing your order to someone else.
- Over-the-counter markets. Forex and most CFDs are dealer markets with no central exchange. Prices come from dealers, not from a single order book. See derivatives.
- Hedging or internalising. A CFD or forex dealer may offset client trades with another party or keep them on its own book. See A-book and B-book.
- Interdealer market. Dealers also trade with each other. News reports quoting "dealers" usually mean these interbank traders.
- Primary dealers. In government debt, selected institutions bid at bond auctions and then trade the bonds with others.
- Conflict of interest. When the dealer is your counterparty, its interests can run against yours. Rules on compliance and front running exist for this reason.
Where you see the term
- Platforms. MetaTrader execution modes and the "dealer" label on some order logs refer to the firm or desk that fills your order. See fill and partial fill.
- Client agreements. These include lines such as "we act as principal" or "we are your counterparty".
- News. You will see phrases like "the rupee weakened in interbank trade, dealers said".
Pakistan context and risk
In Pakistan, the supervisor is the Securities and Exchange Commission of Pakistan (SECP), with trading in listed securities and commodities only via SECP-licensed securities and futures brokers. Also, per the SECP, offshore platforms have no Pakistani licence or oversight and offer no legal protection or recourse. See regulation and safety.
Leveraged forex and CFD trading with any dealer can lose money fast, including more than you planned.
Related terms
Counterparty · A-book and B-book · Exposure · Central counterparty · Clearing and settlement · Trading glossary
Frequent questions
What does dealer mean in simple words?
A dealer is a firm that buys and sells for its own account and quotes prices to clients, so it is the other side of their trades.
Is a forex dealer the same as a broker?
No. A dealer is your counterparty, while a broker passes your order to the market as your agent. Some firms do both.
How does a dealer make money?
Mainly from the bid-ask spread. It can also gain or lose on the positions it holds.
Is trading with a dealer riskier?
Your market risk comes from leverage and price moves, not from the dealer label. There is also a conflict of interest when the dealer is your counterparty, so read the client agreement.