Discuss CSI CSC2 Exam Topic 4 Question 5

Which type of sell side equity revenue is earned when a dealer acts in the capacity of an agent in clients trade?

AFees

BSpreads

CInterest

DCommission

Suggested Answer: D

In the context of sell-side equity revenue, when a dealer acts as an agent for a client's trade, the revenue is typically earned as a commission. The dealer facilitates the trade between buyers and sellers without taking ownership of the securities, earning fees for providing this service.

Types of Revenue in Sell-Side Trading:

Commission: Earned when the dealer acts as an agent.

Spreads: Earned when the dealer acts as a principal, buying securities at one price and selling at a higher price.

Fees: Charged for additional services, such as research or analytics.

Interest: Earned from financing activities or margin accounts, not directly tied to trading.

Explanation of Options:

A . Fees: Incorrect; fees are typically charged for services, not for acting as an agent.

B . Spreads: Incorrect; spreads are earned when the dealer acts as a principal.

C . Interest: Incorrect; interest revenue is unrelated to acting as an agent.

D . Commission: Correct answer. Acting as an agent involves earning commissions for facilitating trades.

CSC Volume 2, Chapter 27: The Role of Sell-Side Dealers, which details revenue models in institutional and retail trading.

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14 comments · newest first

Vanesa 10 months ago

Really? I thought commissions were a thing of the past.

Ora 10 months ago

I thought it was A) Fees, but now I'm not so sure.

Marleen 10 months ago

Definitely D) Commission. That's how agents get paid!

Flo 10 months ago

I agree with D) Commission, but it seems too simple, right?

Paulina 10 months ago

No way, it's B) Spreads! That's what I've always learned.

Noe 11 months ago

I’m pretty confident it’s D) Commission. Agents usually get paid that way, right? I hope I’m not mixing it up with fees!

Kenneth 11 months ago

I’m leaning towards B) Spreads, but I recall that spreads are more about market making. This one feels tricky.

Eladia 11 months ago

I remember practicing a question about dealer roles, and I think it was related to A) Fees, but that doesn't seem right for this context.

Allene 11 months ago

I think the answer might be D) Commission since agents typically earn commissions on trades, but I'm not entirely sure.

Dean 12 months ago

Hmm, I'm a little stuck on this one. I know the different types of equity revenue, but I'm not sure how to apply that knowledge to this specific scenario where the dealer is acting as an agent. I might have to come back to this one and think it through again.

Bronwyn 12 months ago

I feel pretty confident about this one. The key is that the question specifies the dealer is acting as an agent, not a principal. So the revenue they earn would be a commission, not a spread or interest. D) Commission is the right answer.

Holley 12 months ago

Okay, let me think this through. When a dealer acts as an agent, they're representing the client and executing the trade on their behalf, right? So the dealer would earn a commission for that service. I'm going with D) Commission.

Carma 1 year ago

Hmm, I'm a bit unsure about this one. Is it asking about the revenue earned by the dealer or the client? I'm not totally clear on the distinction between the different types of equity revenue.

Honey 1 year ago

I think this is asking about the revenue earned by a dealer when they act as an agent for a client's trade. I'm pretty sure the answer is D) Commission.

CSI CSC2 Exam - Topic 4 Question 5 Discussion