A pension fund manager needs to sell a $75 million block of stock immediately due to a sudden geopolitical event. They contact a sell-side dealer and ask for a 'principal bid'. How does this differ from a standard agency trade?

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The key feature of a principal (or liability) trade is the dealer's commitment of its own capital to provide the client with immediacy, taking the risk onto its own books.

A pension fund manager needs to sell a $75 million block of stock immediately due to a sudden geopolitical event. They contact a sell-side dealer and ask for a 'principal bid'. How does this differ from a standard agency trade?

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