Principal Trade
Categories: Trusts and Estates, Investing, Stocks, Bonds, Managed Funds
This is when the principal in the trade (the owner, more or less) trades for its own profit.
It's something broker-dealers do all the time to make money for their own business by keeping the difference between the bid and ask prices. A client may be certain she wants to buy 100 shares of Amazon at $400—but the principal is the one selling those shares to her. It's like "betting against the house" because presumably the principal (usually a brokerage) knows more about the (short-term) expectations of a given stock than the retired school teacher to whom it is selling.
So when things are a principal trade, they get special attention when selling to Ma and Pa Kettle, little old ladies, and cardiologists from Milwaukee.