"principal trade" vs. "agency trade"

[happyluckyhana]

Can anyone please help me distinguish ”principal trade” vs. “agency trade”? I know that “principal trade” involves a discount of a spread, but what does that really mean? What is a real-life example for it?

 

[ro424]

Principal trade is when i sell something from my own inventory to you for a profit (discount/spread).
Agency trade is when i broker a sale (i.e. buy from somone else and sell to you and take a commission for doing so).
Car dealers engage in principal trades.
Real estate agents engage in agency trades.

 

[daneyh]

Logged into to say thanks for the analogy, it makes things quite clear, more so than many other posts as well as schweser/CFAI themselves.