Security brokers and dealers are firms that buy and sell securities for a fee, hold an inventory of securities for resale, or do both. The firms that make up this sector are those that submit information to the Securities and Exchange Commission on one of two reporting forms, either the Financial and Operational Combined Uniform Single Report of Brokers and Dealers (FOCUS) or the Report on Finances and Operations of Government Securities Brokers and Dealers (FOGS).
Brokers and dealers are an important link in the transmission of funds from savers to investors because they are a means of distributing both new security issues and those being resold on the secondary market. Dealers in U.S. government securities (FOGs reporters) that stand ready to buy from or sell to the Federal Reserve System assist in the implementation of monetary policy conducted through open market operations.
The major assets of the sector are collateral repayable from funding corporations in connection with securities borrowing (included in miscellaneous assets), securities held for redistribution, and security credit provided to customers. Sector operations are financed largely by net transactions with parent companies, customer credit balances, security repurchase agreements, and security credit from private depository institutions.