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HMRC internal manual

Stamp Taxes on Shares Manual

Financial markets: types of financial brokers and dealers: principal broker dealers

Principal broker dealer

The role of the principal broker dealer is to manage his own “pool” of securities, buying from and selling to clients from that “pool”. The principal broker dealer does not therefore provide a service of purchasing or selling securities on behalf of clients. The principal makes its profit on the “turn” in the price, i.e. by selling for more than he bought or vice versa. On any contract note with a client, it must indicate the business capacity in which the broker dealt, i.e. principal.

Where a principal broker sells securities to a client (i.e. principal sale/client purchase), any separate charge such as commission, “mark-up” etc is treated as additional consideration for stamp duty or SDRT consideration purposes.

Intermediary broker dealer

An intermediary dealer broker, or inter-dealer broker, is a broker who acts as a ‘middleman’ exclusively to market makers or broker dealers who wish to trade anonymously.