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Primary dealer

August 24, 2023

A primary dealer is a firm that buys government securities directly from a government, with the intention of reselling them to others, thus acting as a market maker of government securities. The government may regulate the behaviour and number of its primary dealers and impose conditions of entry. Some governments sell their securities only to primary dealers; some sell them to others as well. Governments that use primary dealers include Australia,[1] Belgium, Brazil,[2] Canada, China, France, Hong Kong, India, Italy, Japan, Singapore, Spain, Sweden,[3] the United Kingdom, Pakistan and the United States.

Primary dealers in the European Union

As of 1 August 2023, the European Commission of the European Union identifies the following 37 primary dealers:[4]

  • Banco Bilbao Vizcaya Argentaria S.A.
  • Banco Santander S.A.
  • Barclays Bank Ireland Plc
  • BNP Paribas S.A.
  • BofA Securities Europe S.A.
  • Bred Banque Populaire
  • CaixaBank S.A.
  • Cecabank S.A.
  • Citigroup Global Markets Europe AG
  • Commerzbank AG
  • Credit Agricole Corporate and Investment Bank S.A.
  • Danske Bank A/S
  • Deutsche Bank AG
  • DZ Bank AG Deutsche Zentral-Genossenschaftsbank
  • Erste Group Bank AG
  • Eurobank S.A.
  • Goldman Sachs Bank Europe SE
  • HSBC Continental Europe S.A.
  • Intesa Sanpaolo S.p.A.
  • J.P. Morgan SE
  • KBC Bank N.V.
  • Landesbank Baden-Württemberg
  • Morgan Stanley Europe SE
  • MPS Capital Services Banca per le Imprese S.p.A.
  • National Bank of Greece S.A.
  • Natixis S.A.
  • Natwest Markets N.V.
  • Nomura Financial Products Europe GmbH
  • Nordea Bank Abp
  • Piraeus Bank S.A.
  • Raiffeisen Bank International AG
  • Royal Bank of Canada Capital Markets (Europe) GmbH
  • Skandinaviska Enskilda Banken AB (SEB)
  • Societe Generale S.A.
  • Swedbank AB
  • TD Global Finance Unlimited Company
  • UniCredit Bank AG

Primary dealers in the United States

In the United States, a primary dealer is a bank or securities broker-dealer that is permitted to trade directly with the Federal Reserve System ("the Fed").[5] Such firms are required to make bids or offers when the Fed conducts open market operations, provide information to the Fed's open market trading desk, and to participate actively in U.S. Treasury securities auctions.[6] They consult with both the U.S. Treasury and the Fed about funding the budget deficit and implementing monetary policy. Many former employees of primary dealers work at the Treasury because of their expertise in the government debt markets, though the Fed avoids a similar revolving door policy.[7][8]

The relationship between the Fed and the primary dealers is governed by the Primary Dealers Act of 1988 and the Fed's operating policy "Administration of Relationships with Primary Dealers."[9] Primary dealers purchase the vast majority of the U.S. Treasury securities (T-bills, T-notes, and T-bonds) sold at auction, and resell them to the public. Their activities extend well beyond the Treasury market. For example, according to the Wall Street Journal Europe (2/9/06 p. 20), all of the top ten dealers in the foreign exchange market are also primary dealers, and between them account for almost 73% of foreign exchange trading volume. Arguably, this group's members are the most influential and powerful non-governmental institutions in global financial markets. Group membership changes slowly, with the current list available from the New York Fed.[5]

The primary dealers form a worldwide network that distributes new U.S. government debt. For example, Daiwa Securities and Mizuho Securities distribute the debt to Japanese buyers. BNP Paribas, Barclays, Deutsche Bank and NatWest Group distribute the debt to European buyers. Goldman Sachs, and Citigroup account for many American buyers. Nevertheless, most of these firms compete internationally and in all major financial centers.

In response to the subprime mortgage crisis and to the collapse of Bear Stearns, on March 19, 2008, the Federal Reserve set up the Primary Dealers Credit Facility (PDCF), whereby primary dealers could borrow at the Fed's discount window using several forms of collateral including mortgage-backed loans. The PDCF was closed on February 1, 2010.[10]

History

The current system of primary dealers was set up in 1960 with 18 dealers. The number of primary dealers grew to 46 in 1988, declined to 21 by 2007, increased to 24 by July 2019, then to 25 in April 2022.[5] In December 2021, three of the 24 primary dealers[11] were employing a woman chief economist, which dwindled, in 2023, to one woman chief economist among the 24 primary dealer companies.[12]

Primary dealers with the Federal Reserve Bank of New York

As of June 30, 2022, the New York Fed identifies the following 24 primary dealers:[5]

References

  1. ^ "How to Buy AGS | AOFM". Retrieved 2019-04-04.
  2. ^ "Dealers - Artigo Dívida Pública Federal - STN". www.tesouro.fazenda.gov.br. Retrieved 2017-01-03.
  3. ^ "Riksgalden: Primary dealers". Retrieved 2023-01-15.
  4. ^ "Primary Dealer Network" European Commission, European Union. Retrieved August 22, 2023.
  5. ^ a b c d Federal Reserve Bank of New York: Primary Dealers. Retrieved August 16, 2023.
  6. ^ Federal Reserve Bank of New York:Primary Dealer Policies. Retrieved March 12, 2008
  7. ^ Opensecrets.org: Revolving Door search result for Federal Reserve System[permanent dead link]. Retrieved February 11, 2009.
  8. ^ Opensecrets.org: Revolving Door search result for Treasury (executive offices)[permanent dead link]. Retrieved February 11, 2009.
  9. ^ Operating Policy, Federal Reserve, January 11, 2010. Retrieved October 5, 2011
  10. ^ Federal Reserve Bank of New York:Primary Dealer Credit Facility FAQ. Retrieved March 20, 2008
  11. ^ Federal Reserve Bank of New York: Additions and Removals. Retrieved August 17, 2023.
  12. ^ "Women Chief US Economists Have Gotten Even Rarer on Wall Street" Reade Pickert, Bloomberg Law, May 2, 2023. Retrieved August 17, 2023.

External links

  • NY Federal Reserve - Primary Dealers

August 24, 2023
primary, dealer, examples, perspective, this, article, represent, worldwide, view, subject, improve, this, article, discuss, issue, talk, page, create, article, appropriate, august, 2023, learn, when, remove, this, template, message, primary, dealer, firm, tha. The examples and perspective in this article may not represent a worldwide view of the subject You may improve this article discuss the issue on the talk page or create a new article as appropriate August 2023 Learn how and when to remove this template message A primary dealer is a firm that buys government securities directly from a government with the intention of reselling them to others thus acting as a market maker of government securities The government may regulate the behaviour and number of its primary dealers and impose conditions of entry Some governments sell their securities only to primary dealers some sell them to others as well Governments that use primary dealers include Australia 1 Belgium Brazil 2 Canada China France Hong Kong India Italy Japan Singapore Spain Sweden 3 the United Kingdom Pakistan and the United States Contents 1 Primary dealers in the European Union 2 Primary dealers in the United States 2 1 History 2 2 Primary dealers with the Federal Reserve Bank of New York 3 References 4 External linksPrimary dealers in the European Union EditAs of 1 August 2023 update the European Commission of the European Union identifies the following 37 primary dealers 4 Banco Bilbao Vizcaya Argentaria S A Banco Santander S A Barclays Bank Ireland Plc BNP Paribas S A BofA Securities Europe S A Bred Banque Populaire CaixaBank S A Cecabank S A Citigroup Global Markets Europe AG Commerzbank AG Credit Agricole Corporate and Investment Bank S A Danske Bank A S Deutsche Bank AG DZ Bank AG Deutsche Zentral Genossenschaftsbank Erste Group Bank AG Eurobank S A Goldman Sachs Bank Europe SE HSBC Continental Europe S A Intesa Sanpaolo S p A J P Morgan SE KBC Bank N V Landesbank Baden Wurttemberg Morgan Stanley Europe SE MPS Capital Services Banca per le Imprese S p A National Bank of Greece S A Natixis S A Natwest Markets N V Nomura Financial Products Europe GmbH Nordea Bank Abp Piraeus Bank S A Raiffeisen Bank International AG Royal Bank of Canada Capital Markets Europe GmbH Skandinaviska Enskilda Banken AB SEB Societe Generale S A Swedbank AB TD Global Finance Unlimited Company UniCredit Bank AGPrimary dealers in the United States EditIn the United States a primary dealer is a bank or securities broker dealer that is permitted to trade directly with the Federal Reserve System the Fed 5 Such firms are required to make bids or offers when the Fed conducts open market operations provide information to the Fed s open market trading desk and to participate actively in U S Treasury securities auctions 6 They consult with both the U S Treasury and the Fed about funding the budget deficit and implementing monetary policy Many former employees of primary dealers work at the Treasury because of their expertise in the government debt markets though the Fed avoids a similar revolving door policy 7 8 The relationship between the Fed and the primary dealers is governed by the Primary Dealers Act of 1988 and the Fed s operating policy Administration of Relationships with Primary Dealers 9 Primary dealers purchase the vast majority of the U S Treasury securities T bills T notes and T bonds sold at auction and resell them to the public Their activities extend well beyond the Treasury market For example according to the Wall Street Journal Europe 2 9 06 p 20 all of the top ten dealers in the foreign exchange market are also primary dealers and between them account for almost 73 of foreign exchange trading volume Arguably this group s members are the most influential and powerful non governmental institutions in global financial markets Group membership changes slowly with the current list available from the New York Fed 5 The primary dealers form a worldwide network that distributes new U S government debt For example Daiwa Securities and Mizuho Securities distribute the debt to Japanese buyers BNP Paribas Barclays Deutsche Bank and NatWest Group distribute the debt to European buyers Goldman Sachs and Citigroup account for many American buyers Nevertheless most of these firms compete internationally and in all major financial centers In response to the subprime mortgage crisis and to the collapse of Bear Stearns on March 19 2008 the Federal Reserve set up the Primary Dealers Credit Facility PDCF whereby primary dealers could borrow at the Fed s discount window using several forms of collateral including mortgage backed loans The PDCF was closed on February 1 2010 10 History Edit The current system of primary dealers was set up in 1960 with 18 dealers The number of primary dealers grew to 46 in 1988 declined to 21 by 2007 increased to 24 by July 2019 then to 25 in April 2022 5 In December 2021 three of the 24 primary dealers 11 were employing a woman chief economist which dwindled in 2023 to one woman chief economist among the 24 primary dealer companies 12 Primary dealers with the Federal Reserve Bank of New York Edit As of June 30 2022 update the New York Fed identifies the following 24 primary dealers 5 ASL Capital Markets Inc Bank of Montreal Chicago Branch Bank of Nova Scotia New York Agency BNP Paribas Securities Corp Barclays Capital Inc BofA Securities Cantor Fitzgerald amp Co Citigroup Global Markets Inc Daiwa Capital Markets America Inc Deutsche Bank Securities Inc Goldman Sachs amp Co LLC HSBC Securities USA Inc Jefferies LLC J P Morgan Securities LLC Mizuho Securities USA LLC Morgan Stanley amp Co LLC NatWest Markets Securities Inc Nomura Securities International Inc RBC Capital Markets LLC Royal Bank of Canada Santander US Capital Markets LLC Societe Generale New York Branch TD Securities USA LLC UBS Securities LLC Wells Fargo Securities LLCReferences Edit How to Buy AGS AOFM Retrieved 2019 04 04 Dealers Artigo Divida Publica Federal STN www tesouro fazenda gov br Retrieved 2017 01 03 Riksgalden Primary dealers Retrieved 2023 01 15 Primary Dealer Network European Commission European Union Retrieved August 22 2023 a b c d Federal Reserve Bank of New York Primary Dealers Retrieved August 16 2023 Federal Reserve Bank of New York Primary Dealer Policies Retrieved March 12 2008 Opensecrets org Revolving Door search result for Federal Reserve System permanent dead link Retrieved February 11 2009 Opensecrets org Revolving Door search result for Treasury executive offices permanent dead link Retrieved February 11 2009 Operating Policy Federal Reserve January 11 2010 Retrieved October 5 2011 Federal Reserve Bank of New York Primary Dealer Credit Facility FAQ Retrieved March 20 2008 Federal Reserve Bank of New York Additions and Removals Retrieved August 17 2023 Women Chief US Economists Have Gotten Even Rarer on Wall Street Reade Pickert Bloomberg Law May 2 2023 Retrieved August 17 2023 External links EditNY Federal Reserve Primary Dealers Retrieved from https en wikipedia org w index php title Primary dealer amp oldid 1171705512, wikipedia, wiki, book, books, library,

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