Thursday, May 7, 2009

Brokerage firms

AS we already noted, Brokerage firms serve the valuable function of linking buyers and sellers of financial assets. In this regard they function as intermediaries, earning a fee for each transaction they create. Unlike garden-variety non-depository institutions, however, modern brokerage firms such as Merrill Lynch and Charles Schwab also compete with depository institutions in the deposit market, where they attract depositors with money market mutual funds. Nonetheless, brokerage firms are not formally considered depository institutions because their main function is to serve as brokers in the secondary debt and equity markets.

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