An agency broker's role is to:

• A. Execute trades on behalf of clients and not take principal risk
• B. Trade on its own account and take principal risk
• C. Regulate market activities
• D. Settle trades for clearing houses

Answer: (A)

An agency broker acts as an intermediary who executes trades for clients without taking on principal risk. This means they pass orders to the market and complete the transaction for the client, earning a fee or commission rather than trading with their own capital. They don’t hold inventory or bet on price movements, which is why they’re described as acting on behalf of clients. The other roles described don’t fit an agency broker’s function: trading on its own account involves taking principal risk and using the firm’s own capital; regulating market activities is the job of regulators and exchanges; and settling trades for clearing houses is handled by clearing members and custodians, not by the agency broker as its primary role.