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Anintermediary, also known as amiddleman orgo-between, is defined in various ways, according to context. Inlaw ordiplomacy, an intermediary is athird party who offersintermediation services between two parties. Intrade orbarter, an intermediary acts as a conduit for goods or services offered by a supplier to a consumer, which may includewholesalers,resellers,brokers, and various other services. "Intermediation" refers to a process matching two sides of a market, such as buyers and sellers by a third party such as a broker, agent, or wholesaler. One common example of intermediation is in thefinance industry, where it involves the matching of lenders with borrowers by abank.[1]
In diplomacy andinternational relations, an intermediary may convey messages between principals in a dispute, allowing the avoidance of direct principal-to-principal contact.[2] Where the two parties are geographically distant, the process may be termedshuttle diplomacy. Where parties do not want formal diplomatic relations, an intermediary state may serve as aprotecting power facilitatingdiplomacy withoutdiplomatic recognition.[citation needed]
In law, the job of an intermediary involves conveying messages between principals in a dispute, preventing direct contact and potential escalation of the issue. In law, intermediaries can facilitate communication between a vulnerablewitness,defendant and court personnel to acquire valuable evidence. Intermediaries can facilitate communication between a vulnerablewitness ordefendant and court personnel to acquire valuable evidence and to ensure all parties have a fair trial.[citation needed]
Inlaw enforcement inMexico, the concept of intermediary has emerged with theAutodefensas, a self-governing protective association of citizens, which brokers in the struggles of the state with violent, criminal organizations known as cartels.[3]
In trade, an intermediary, middleman, orcommercial agent acts as a conduit for goods or services offered by a supplier to a consumer. Typically the intermediary offers someadded value to the transaction which may not be possible by direct trading. Examples of intermediaries arewholesalers,resellers,[citation needed] and agents who purchase produce from rural food producers.[4]
Common usage includes theinsurance andfinancial services industries where e.g.mortgage brokers,insurance brokers, andfinancial advisers offer intermediation services in the supply of financial products such asmortgage loans, insurance, and investment products. In relation toenergy supplies, third party intermediaries provide energy-related advice, assistance in purchasing energy and management of energy needs.[5] In a wider sense, an intermediary can be a person or organization who or which facilitates a contract between two other parties. The interests of commercial agents are protected by legislation such as the EU'sDirective 86/653/EEC of 18 December 1986 on the coordination of the laws of the Member States relating to self-employed commercial agents, asimplemented within eachEU member state. This directive specifically notes that a "commercial agent" is an "intermediary" with continuing authority tonegotiate on behalf of another person.[6] Regulations implementing the directive cover the rights and duties of the principal and the commercial agent, the agent's remuneration, and both parties' continuing obligations after the termination of the contract between them.[7] TheUK legislation specifies that neither principals nor agents mayderogate from their duties as set out in the regulations,[8] and UKcase law confirms that clear authority to contract or negotiate needs to be shown to have been granted by the principle for the negotiating party to be considered a commercial agent.[9] The case ofLondsale v Howard & Hallam Ltd. (2007)[10] is theleading UK case on valuing compensation due for a loss of agency. The Supreme Court held that compensation should be valued according to the amount that a notional third party purchaser would pay for the agency immediately before its termination.[11]
Trading intermediaries can be classified as merchant intermediaries or as accountant intermediaries. Bailey and Bakos (1997) analyzed a number of case studies and identified four roles of electronic intermediaries including information aggregating, providing trust, facilitating and matching.[12]
In financial intermediation, if the matching of lenders and borrowers is successful, the lender obtains a positive rate of return, the borrower receives a return for risk taking andentrepreneurship and thebanker receives a return for making the successful match.[1] If theborrower's speculative play with the funds provided by the bank does not pay off, the bank can face significant losses on its loan portfolio,[1] and if the bank fails itsdepositors can lose some of their money if the deposits are not insured by a third party.
The skill of identifying potential successful newentrepreneurs who can take market share off competitors or develop whole new markets is one of the most vital (and intangible) skills any banking system can possess.[1] An unexpected form of entrepreneurship, andunintended consequence of microfinance initiatives, can be informal intermediation. That is, some entrepreneurial borrowers become informal intermediaries between microfinance initiatives and poorer micro-entrepreneurs. Those who more easily qualify for microfinance split loans into smaller credit to poorer borrowers. Informal intermediation ranges from casual intermediaries at the good or benign end of the spectrum to 'loan sharks' at the professional and sometimes criminal end of the spectrum.[13]
Disintermediation occurs when potential lenders and borrowers interact more directly in thecapital markets, avoiding the intermediation of banks.
Inbarter, the intermediary is a person or group who stores valuables in trade until they are needed, parties to the barter or others have space available to take delivery of them and store them, or until other conditions are met. Theinternet is creating opportunities to automate the role of an intermediary in many bartering contexts.[14]