An interdealer broker acts as what in fixed income trading?

• A. Trader who trades securities between brokers who work in the same firm, e.g. inter-dealers
• B. International brokerage firm and is legally permitted to trade as a dealer internationally
• C. An intermediary between two or more brokerage firms to cross fixed income trades where the anonymity of the broker can be preserved and broker's intent and interest are thereby not disclosed to the counterparty prior to the trade
• D. Broker's research function

Answer: (C)

In fixed income trading, the interdealer broker serves as a neutral intermediary between two or more dealers to cross trades. They connect multiple firms, facilitate the matching of orders, and typically preserve anonymity so that the identities and interests of the counterparties aren’t disclosed before the trade. The broker usually does not take on market risk or own inventory; instead, they earn a fee for arranging the deal. This setup helps liquidity by enabling dealers to find counterparties and execute trades efficiently without revealing their intentions or strategies upfront.