A municipal bond dealer typically engages in which of the following activities?

• A. II Participating in syndicates bidding on new issues
• B. IV Acting as an agent, buying and selling positions for customers
• C. I Distributing bona-fide quotes to interested parties
• D. III Acting as a market maker by taking long positions

Answer: (B)

Municipal bond dealers are most commonly acting as agents for their customers, executing buy and sell orders on behalf of clients and earning a fee or commission for facilitating the trade. This agent role means the dealer does not take on the issuer or own inventory in the trade; the goal is to get the customer's order executed in the market with fair pricing and best execution.

Participating in syndicates bidding on new issues describes underwriting activity, which is a separate line of business for dealers and not the everyday role of a typical municipal dealer. Acting as a market maker by taking long positions involves holding inventory and quoting bids and offers to provide liquidity, which is characteristic of a dealer who maintains quotes, not the standard customer-order execution path. Distributing bona-fide quotes to interested parties pertains more to price dissemination by market makers or other market participants, whereas the primary everyday function for many municipal dealers is to facilitate client trades as an agent.