What role does a dealer have in the OTC market?

In the over-the-counter (OTC) market, a dealer primarily functions as a market maker. This means that the dealer has the responsibility of providing liquidity to the market by being ready to buy and sell securities. They facilitate trading by quoting prices at which they are willing to purchase or sell specific securities, thereby helping to establish a market for those securities.

Dealers in the OTC market often hold inventories of various securities, which allows them to execute trades more efficiently. When an investor wants to buy or sell a security, they can do so easily because the dealer is prepared to transact at any given time, improving the overall efficiency and liquidity of the market.

In contrast, a broker acts as an intermediary between buyers and sellers but does not take on the same level of risk or maintain inventory like a market maker. Regulators oversee market activities to ensure compliance with laws and regulations, while investors are parties that partake in buying and selling securities for personal or institutional portfolios. Hence, the nature of a dealer's role as a market maker is vital in providing stability and accessibility within the OTC market.