Primary dealer

Primary dealer

A primary dealer is a bank or securities broker-dealer that may trade directly with the Federal Reserve System of the United States. [http://www.ny.frb.org/markets/primarydealers.html Federal Reserve Bank of New York:Primary Dealers] . Retrieved April 27, 2007] They 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. [http://www.ny.frb.org/markets/pridealers_policies.htmlFederal Reserve Bank of New York:Primary Dealer Policies] . Retrieved March 12, 2008] 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. [http://www.opensecrets.org/revolving/search_result.asp?agency=Federal+Reserve+System&id=EIFRS] [http://www.opensecrets.org/revolving/search_result.asp?agency=Treasury+%28executive+offices%29&id=EATRE01]

Between them, these 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 forex trading volume. Arguably, this group's members are the most influential and powerful non-governmental institutions in world financial markets. Group membership changes slowly, with the current list available from the New York Fed.

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 RBS Greenwich Capital (a division of the Royal Bank of Scotland) 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 can borrow at the Fed's discount window using several forms of collateral including mortgage backed loans. [http://www.newyorkfed.org/markets/pdcf_faq.html Federal Reserve Bank of New York:Primary Dealer Credit Facility FAQ] . Retrieved March 20, 2008]

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 and then declined to 21 in 2007.cite web
title =Fedpoint
work =Primary Dealers
publisher =New York Federal Reserve
date =
url =http://www.newyorkfed.org/aboutthefed/fedpoint/fed02.html
format =
doi =
accessdate =2007-10-30
]

In 2005 Fed trades with primary dealers averaged $550 million per day.

The newest primary dealer (effective on August 1, 2006) is Cantor Fitzgerald. The previous last major addition to the list (excluding name changes) was Countrywide Securities, which joined in 1999. [ [http://ccm.countrywide.com/ccm/default.asp?2aQEBD$5i4tV5P3myd8z1~7wRfu Welcome to Countrywide Capital Markets] . Retrieved on April 27, 2007.] As of August 4, 2008, the last update to the official list was July 15, 2008. [ [http://www.ny.frb.org/markets/pridealers_current.html List of Primary Dealers, New York Federal Reserve] ] Effective July 15, 2008 Countrywide has been removed from the list, due to its takeover by Bank of America announced on January 11, 2008.

On September 15, 2006, ABN AMRO Bank, N.V., New York Branch withdrew its name from the list of primary dealers; CIBC World Markets Corp. withdrew on February 8, 2007; and Nomura Securities Inc. withdrew on November 30, 2007.

On August 31 2008, Commerzbank announced that it would acquire Dresdner Bank, ending Dresdner Kleinwort Wasserstein Securities' tenure as a primary dealer.

On September 15, 2008, Lehman Brothers declared Chapter 11 bankruptcy and ceased being a primary dealer. On the same day, Merrill Lynch was acquired by Bank of America, and will cease to be a primary dealer when the acquisition closes.

Effective October 1, 2008, Bear, Stearns & Co. was deleted from the list of primary dealers as a result of their acquisition by J.P. Morgan Securities Inc. [http://www.newyorkfed.org/newsevents/news/markets/2008/an081001.html]

Current list

As of September 22, 2008 according to the Federal Reserve Bank of New York the list includes:
*BNP Paribas Securities Corp.
*Bank of America Securities LLC
*Barclays Capital Inc.
*Cantor Fitzgerald & Co.
*Citigroup Global Markets Inc.
*Credit Suisse Securities (USA) LLC
*Daiwa Securities America Inc.
*Deutsche Bank Securities Inc.
*"Dresdner Kleinwort Securities LLC."
*Goldman, Sachs & Co.
*HSBC Securities (USA) Inc.
*J. P. Morgan Securities Inc.
*"Lehman Brothers Inc."
*"Merrill Lynch Government Securities Inc."
*Mizuho Securities USA Inc.
*Morgan Stanley & Co. Incorporated
*UBS Securities LLC.

Many changes to the list have occurred during 2008. Two primary dealers, J.P. Morgan Securities Inc. and Bear Stearns & Co. Inc., are expected to merge sometime later this year. Dresdner Kleinwort was bought by Commerzbank on August 31. Lehman Brothers filed for bankruptcy on September 15 and Merrill Lynch was acquired by Bank of America on the same day.

References

External links

* [http://www.ny.frb.org/markets/pridealers_current.html NY Federal Reserve - Primary Dealers]


Wikimedia Foundation. 2010.

Игры ⚽ Поможем решить контрольную работу

Look at other dictionaries:

  • primary dealer — A designation given by the Federal Reserve System to commercial banks or broker/dealers who meet specific criteria. Among the criteria are capital requirements and meaningful participation in the Treasury auctions. Chicago Board of Trade glossary …   Financial and business terms

  • primary dealer — See Treasury securities primary dealer …   Euroclear glossary

  • Primary Dealer Credit Facility — On March 17, 2008, in response to the subprime mortgage crisis and the collapse of Bear Stearns, the Federal Reserve announced the creation of a new lending facility, the Primary Dealer Credit Facility (PDCF). Eligible borrowers include all… …   Wikipedia

  • Primary Dealer Credit Facility - PDCF — An institution created by the Federal Reserve to provide overnight loans to primary dealers through their clearing banks in exchange for eligible collateral. The Primary Dealer Credit Facility (PDCF) provides loans that settle the same business… …   Investment dictionary

  • Primary Dealer — A pre approved bank, broker/dealer or other financial institution that is able to make business deals with the U.S. Federal Reserve, such as underwriting new government debt. These dealers must meet certain liquidity and quality requirements as… …   Investment dictionary

  • primary dealer — /ˌpraɪməri di:lə/ noun a marketmaker dealing in government stocks …   Dictionary of banking and finance

  • dealer — A firm or an individual who buys and sells for his own account. A dealer has ownership, even if only for an instant, between a purchase from one party and a sale to another party, and is thus compensated by the spread between the price paid and… …   Financial and business terms

  • Dealer — An entity that stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). The New York Times Financial Glossary * * * dealer deal‧er [ˈdiːlə ǁ ər] noun [countable] JOBS 1.… …   Financial and business terms

  • Treasury securities primary dealer — Financial institution having obtained, by the State, a particular role relative to the issuance, the placement, and the secondary market of Treasury securities, and having on a permanent basis, the obligation to ensure the liquidity of the… …   Financial and business terms

  • Treasury securities primary dealer — Financial institution having obtained, by the State, a particular role relative to the issuance, the placement, and the secondary market of Treasury securities, and having on a permanent basis, the obligation to ensure the liquidity of the… …   Euroclear glossary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”