What is the Full Form of IDB in Insurance?
The Full Form of IDB in insurance is Inter-dealer Brokers. Inter-dealer brokers (IDBs) are specialized financial intermediaries who facilitate transactions between investment banks, broker-dealers, and other large financial organizations. IDBs function with huge blocks of securities with low trading volume or when clients want to keep their orders anonymous.
What is the role of interdealer brokers?
The inter-dealer broker frequently focuses on trades where there is no official exchange or market maker system, while they may also function as agents for major trades executed on exchanges. As a result, IDBs are also active in the over-the-counter (OTC) markets, servicing municipal, government, corporate, and other bonds. An important function of the IDBs is to smooth out the market during the times of market stress. At times, they are the only players who are willing to buy the securities that are undervalued and take the risk, until the market returns to a stable state.
Significance of Inter dealer brokers:
IDBs serve an important function in linking buyers and sellers of less well-known fixed-income securities. Inter-dealer brokers provide value to financial institution traders in a variety of ways. IDBs increase price discovery and transparency by disclosing the bid, offer, and size of available securities for trade.