question about bond trade commission policy?

Discussion in 'Trading' started by bbmak, Feb 19, 2006.

  1. bbmak


    Recently, I try to purchase municipal bonds, but when i look at the commission
    policy under the bond trading, it said,

    "1 E*TRADE Securities may act as principal on any fixed-income transaction.
    When acting as principal, we will add a markup to any purchase, and subtract a
    markdown from every sale. In addition, there may also be a transaction fee
    based on the size of the trade. This markup or markdown and any transaction fee
    will be included in the price quoted to you."

    May I know what is that mean? Can you explain the quote in english? I don't
    understand the part where they state that the markup - markdown? What is a
    markup and markdown?

    The quote copies directly from this page

  2. when acting as principal, the broker/dealer will get the bond, say for 900 and sell to you at 950. The 50 is the markup

    If you sell your bond to them, they can sell it in the market, for 950, but quote you 900. That is the mark-down = 50.00

    There is no set # how much they will mark up or mark down, the NASD has a policy not to make it higher than 5%

  3. bbmak


    so they act like a dealer. Are there anyway I can purchase a munis bond through etrade, but without markup or down????