When acting as a principal, how do investment dealers generate revenue?

When acting as a principal, investment dealers buy and sell securities for their own account. They

generate revenue by earning a spread, which is the difference between the price at which they buy

securities (bid price) and the price at which they sell them (ask price). This is distinct from their role

as an agent, where revenue is earned through commissions on trades executed on behalf of clients.

Why Other Options are Incorrect:

A . Through commissions: Commissions are earned when acting as an agent, not as a principal.

B . Through tracers: This term does not apply to revenue generation.

C . Through brokerage charges: Brokerage charges relate to fees imposed on client accounts, not

principal trading spreads.

Reference:

CSC Volume 1, Chapter 1, "The Principal and Agency Functions of Investment Dealers" explains how

spreads generate revenue in principal trades​.