In financial markets, what role do dealers typically perform?

Dealers play a crucial role in financial markets by fostering liquidity between buyers and sellers. They act as intermediaries who facilitate transactions by buying and selling securities, which helps to ensure that there is always a market for those securities. By holding an inventory of various securities, dealers enable them to quickly execute trades on behalf of investors, thus reducing the time taken for buyers to find sellers and vice versa. This activity enhances market efficiency and allows for smoother operation of financial markets, ensuring that securities can be traded with minimal price disruption.

In contrast, the creation of new securities is typically the role of issuers, not dealers. While compliance with regulatory requirements is essential for all market participants, managing regulatory compliance usually falls under the purview of compliance officers or regulatory bodies rather than dealers specifically. Lending funds to borrowers is primarily the function of financial institutions like banks, which offer credit to consumers and businesses. Thus, the function of dealers in maintaining and enhancing market liquidity is what sets them apart in the financial landscape.