What is an inter-dealer broker?

Dealing solely with market makers, inter-dealer brokers or IDBs, are specialist brokerage firms that work within the over-the-counter (OTC) derivatives and bond markets as an intermediary between dealers, dealer banks and financial institutions.

Where have you heard about an inter-dealer broker?

IDBs have been frequently in the news since the revelations of the Libor Scandal, accused of colluding with financial institutions to set global benchmark interest rates that may have contrinuted to the 2008 financial crash.

What you need to know about inter-dealer brokers...

IDBs operate in markets that do not have a market maker - a securities or assets dealer in securities who only buys or sells at specific prices. These include the bond market and OTC derivatives market.

In a bond market, investors are provided with certificates of debt securities against corporate or government debts. In the OTC derivative market, securities are traded that are not recognised as part of a centralised exchange, such as the FTSE, NYSE  or the Nikkei.