What describes an agency transaction in securities?

An agency transaction in securities is characterized by the involvement of a broker acting as a middleman between a buyer and seller. In this type of transaction, the broker does not buy or sell securities on their own behalf; instead, they facilitate the trade by connecting clients who want to buy securities with those who are willing to sell them. This role as an intermediary is fundamental to agency transactions as the broker earns a commission for their service in enabling the exchange.

In contrast to the correct answer, other options describe different scenarios or roles. For example, when the broker is the principal buyer, the transaction might be described as a principal transaction rather than an agency transaction. Requiring a client to be present is not a defining characteristic of an agency transaction; many transactions can occur without the client physically present. Lastly, an agency transaction inherently involves an exchange of money for securities, making the notion of a transaction that does not involve such an exchange incompatible with the definition of an agency transaction. Therefore, understanding the role of the broker as a facilitator highlights why the description of an agency transaction includes the broker as a middleman.