What is the main characteristic of a dealer in financial transactions?

The main characteristic of a dealer in financial transactions is that they provide liquidity by holding inventory. Dealers engage in buying and selling financial instruments, such as stocks or bonds, and they do so by maintaining an inventory of these assets. This allows them to facilitate trades efficiently, as they can sell from their own inventory rather than waiting for a buyer to come along. By holding inventory, dealers can step into the market to meet demand for a security, thus providing liquidity which helps to stabilize prices and ensure that transactions can occur more smoothly.

This contrasts with other roles in financial markets, such as brokers, who primarily facilitate trades between buyers and sellers without holding inventory themselves. Auction representatives and commission-based earnings typically describe different functions and revenue models not central to the definition of a dealer's role in providing that essential market liquidity.