Final answer:
A broker-dealer acting in the capacity of buying or selling for its own account is acting as a principal, not as an agent, intermediary, or broker. The firm takes on the role of one of the main parties, taking on market risk by holding securities in its inventory.
Step-by-step explanation:
When a broker-dealer buys or sells securities for its own account, the firm is acting in the capacity of a principal. In this case, the broker-dealer is not acting as an agent, intermediary, or a broker who typically facilitates transactions between two parties.
Instead, as a principal, the broker-dealer is one of the main parties involved in the transaction, dealing with customers directly and taking on market risk by holding securities in its inventory.
An intermediary in financial capital markets, such as a bank, operates between two separate entities - for example, between a saver who deposits funds and a borrower who receives a loan. However, the intermediary here is creating a connection, not acting as one of the principal parties in the transactions where funds are combined into a pool and then loaned out.
Therefore, in the context of broker-dealer operations, when buying or selling securities for its own account, a firm takes on the role of a principal, where it owns the securities and takes on the inherent risks and rewards associated with the ownership of those securities.