Brokered market definition
/What is a Brokered Market?
A brokered market is a marketplace in which an intermediary searches for and brings together buyers and sellers. This intermediary does not use its own funds to maintain an inventory for sale to other parties. The broker profits from the price spread that buyers are willing to pay and at which sellers are willing to sell, or through a broker fee. In general, brokered markets increase the number of buyers and sellers, and improve overall liquidity. These markets are most effective when some expertise is required to settle transactions.
Example of a Brokered Market
Here are several examples of brokered markets:
Art broker. A broker can assist an artist in finding buyers for her work.
Automobile broker. A car broker acts on behalf of a buyer to locate car dealers who are willing to sell vehicles at the price designated by the buyer.
Business broker. A broker can assist in finding prospective buyers for a business owned by a client.
Securities broker. A broker uses buy and sell orders to match up buyers and sellers of securities.
Related AccountingTools Course
Brokered Market vs. Auction Market
A brokered market and an auction market differ in how buyers and sellers are matched. In a brokered market, such as real estate or over-the-counter bond markets, brokers act as intermediaries to help buyers and sellers find each other and negotiate terms, typically in markets with less frequent transactions or unique products. In contrast, an auction market, like the New York Stock Exchange, allows buyers and sellers to directly compete by submitting bids and offers, with prices determined by supply and demand at the point of sale. Auction markets are more transparent and efficient for high-volume, standardized assets, while brokered markets provide personalized service for more complex or less liquid transactions.