We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What are Bond Brokers?

Gerelyn Terzo
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Investing in bonds can be a complex process. This is because unlike stocks, bonds primarily trade in the over the counter (OTC) market where there is no centralized pricing entity. Instead, prices are negotiated between brokers either over the telephone or via the Internet. Bond brokers are there to streamline the process of buying and selling corporate bonds. Their job is to serve as intermediaries between buyers and sellers of bonds, primarily in the institutional market, but also to individual investors.

Bonds trade in the fixed-income market and provide a steady stream of revenue to investors in the form of interest and principal payments. These trading instruments are widely considered to carry less risk than stocks, because in order for investors not be paid, a company or government must default or file for bankruptcy. Stocks, which are traded by stock brokers, can be much more volatile and offer investors a chance for greater rewards but also more severe losses.

Although bonds tend to be less risky than stocks, a drawback is that because these securities do not trade on a formal exchange, there is no central marketplace to determine or verify a bond's value. Instead, bond brokers are largely responsible for determining prices. They do this by purchasing bonds from one institutional investor and selling them to another.

The difference between the buy and sell price is called a spread, and this difference is kept by bond brokers as a profit. A spread is masked because it is included as part of a bond's price, and bond brokers are not required to disclose how much they are earning on each trade. In the United States, a bond broker is required by law only to earn a spread that is fair, despite the fact that oversight like that can be interpreted subjectively.

There are ways to research bond prices to get a sense of what the market value is for a security rather than just taking the word of a bond broker. The Internet is a valuable tool for researching past trades. In the U.S., the Financial Industry Regulatory Authority provides some pricing information on bond deals. By researching past deals, an investor can learn the going price for a specific bond or for one with similar trading characteristics to the one he or she is interested in trading. As a result, an investor is better able to determine the true value of a bond and profits being generated by bond brokers.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Gerelyn Terzo
By Gerelyn Terzo
Gerelyn Terzo, a journalist with over 20 years of experience, brings her expertise to her writing. With a background in Mass Communication/Media Studies, she crafts compelling content for multiple publications, showcasing her deep understanding of various industries and her ability to effectively communicate complex topics to target audiences.
Discussion Comments
Gerelyn Terzo
Gerelyn Terzo
Gerelyn Terzo, a journalist with over 20 years of experience, brings her expertise to her writing. With a background in...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.