Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Each Way

What it is:

Each way refers to a broker's act of earning a commission from both the buyer and the seller in a transaction.

How it works (Example):

Let's say John Doe is a broker for XYZ brokerage. He has a client, Jeff Smith, who wants to sell a certain bond from his portfolio. For completing this transaction for Jeff, John will receive a commission.

John has another client, Jane Johnson, who happens to want to buy the same kind of bond. John arranges for Jane to buy John's bond, and for this he earns a commission from Jane. John Doe gets paid each way.

Why it Matters:

Getting paid each way is a dream situation for a broker, because he or she gets paid twice for the same transaction. However, some brokerages limit this activity. The situation can also happen in the real estate business, whereby a real estate agent is helping one client sell a house and happens to have another client who is interested in buying the same house. In these situations, both the seller and the buyer have to receive and acknowledge certain disclosures so that they know the broker is getting paid each way. This mitigates the obvious conflicts of interest that occur in these circumstances.