Dual Trading Definition and Example
Dual Trading Definition – When a broker simultaneously executes customer order and place trade in his account.
In simple words when a broker has some interest in the trading of a particular day or he is executing trade order in customer account as well as his account is dual trading. In this case, the broker acts as both agent as well as dealer. This type of trading is very popular in futures market.
There are two school of thoughts in case of dual trading. One section of the society favors this type of trading and argue that dual trading result in increasing the market performance and liquidity in the market as traders go for large volume of stocks.
However the other part of the society, discourages this practice. They argue that it should be abolished as it results in conflict of interests. Moreover, it also doesn’t effect the market liquidity.
Dual Trading Example
In order to understand dual trading definition, let’s discuss a simple example.
Suppose you have hire an ABC broker to buy and sell stock on behalf of you. Assume one of the stock trading in the stock market is expected to rise because the company have earned profit. You broker also want that stock. So what he will do? While executing your trade, simultaneously he will execute trade in his account as well.