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If a bank act as principal, should it be charging on comission base?

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Generally not. Agents, for example brokers charge on commission base. If a bank acts as principal, it makes a market in securities, buys and sells securities for his own account.

When a bank sells securities in a principal capacity, it usually increases the securities' price over the price it paid to buy the securities. This price increase is called mark up.

If a bank buys securities from its customers, it offers a price that includes a mark-down from the price the bank can get from another dealer. Thus the mark-up and mark-down are the bank's compensation for its transaction services, it should not charge commission. But this may depend on the contract the bank concludes with its customers.

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