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Interdealer brokers are brokerage firms that facilitate
trades between counterparties who are mainly primary dealers;
interdealer brokers do not hold positions in Government
securities themselves. The principal interdealer brokers are
RMJ, Fundamental Brokers, Inc., Garban, Liberty, and Cantor
Fitzgerald (CF). CF is the only interdealer broker that trades
for customers other than primary dealers. CF's customers include
banks, fund managers, and investment funds. Approximately 30
percent of CF's volume of trading in Treasury securities is for
customers who are not primary dealers.
Interdealer brokers provide their customers with CRT
terminals (screens) on which the customers may view in their
offices the best bids and offers made by the broker's
subscribers. The customers telephone bids and offers to their
broker, and the broker electronically posts these bids and offers
on its screens without identifying the customers who are
tendering the bids or offers.5 When a person accepts a bid or an
offer listed with the broker, the broker effectuates the
transaction and indicates on its screens that the bid or offer
was accepted. The broker sends confirmation to the buyer and
seller showing the broker itself as the counterparty; neither the
person quoting the price nor the person accepting the price knows
5 Bids and offers are also quoted directly (verbally or
otherwise) between potential counterparties.
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Last modified: May 25, 2011