An interdealer broker is usually an intermediary between banks – they might conduct deals on behalf of large corporations, but the corporations generally go through the banks first. Interdealer brokers are used when banks want to move large illiquid assets such as interest swaps, commodities or blocks of shares. They are paid a commission for negotiatiing the deal between the buyer and the seller. Many of the deals they arrange are conducted off-exchange.
interdealer broker in the news
The Libor scandal put the spotlight on interdealer brokers. In December 2012 the UK Financial Services Authority alleged that traders in UBS, the investment bank, had been paying interdealer brokers through wash trades – transactions that have no other purpose but to generate fees. In January 2013 it emerged that ICAP, the world's largest interdealer broker had become a focus of the FSA Libor interbank rate-rigging investigation.