Questions: What is the key difference between a floor broker on AMEX and a dealer on NASDAQ? A broker is a market maker while a dealer is not. A dealer operates on a trading floor while a broker deals only with electronic trades. A dealer buys and sells only from his own inventory while a floor broker executes trades both for himself and others. A dealer sells securities and a broker buys them.

The answer is: A dealer buys and sells only from his own inventory while a floor broker executes trades both for himself and others.

Explanation for each option:

1. A broker is a market maker while a dealer is not.

   • This statement is incorrect. On NASDAQ, dealers (also known as market makers) are the ones who provide liquidity by buying and selling from their own inventory. Brokers, on the other hand, act as intermediaries between buyers and sellers.

2. A dealer operates on a trading floor while a broker deals only with electronic trades.

   • This statement is incorrect. Dealers on NASDAQ do not operate on a physical trading floor; NASDAQ is an electronic exchange. Floor brokers on AMEX (American Stock Exchange) operate on a physical trading floor, but brokers can also deal with electronic trades.

3. A dealer buys and sells only from his own inventory while a floor broker executes trades both for himself and others.

   • This statement is correct. Dealers on NASDAQ buy and sell securities from their own inventory, providing liquidity to the market. Floor brokers on AMEX execute trades on behalf of clients and can also trade for their own accounts.

4. A dealer sells securities and a broker buys them.

   • This statement is incorrect. Both dealers and brokers can buy and sell securities. The key difference lies in the fact that dealers trade from their own inventory, while brokers facilitate trades between other parties.

In summary, the key difference is that a dealer buys and sells from his own inventory, while a floor broker executes trades both for himself and others.