Role of primary dealers, Financial Management

Role of Primary Dealers

To promote the investment activity in the Government Securities market, several countries have adopted licensed Primary Dealers (PDs) as important intermediaries in the market. The typical responsibilities of PDs are:

  • Meeting the minimum bidding requirements,
  • Giving two-way quotes, and
  • Providing information of the market activity to the central bank etc.

In some instances PDs have special rights to different activities in the money market like primary auctions, or some special facilities in market operations, open market operations, underwriting commission etc. PDs have an important role to play in the development of the secondary market for government securities. The prices of PDs account for all the available information, they trade in the market, and also provide the central bank with the latest market information, and design new instruments, etc. The vital role of PDs in the market requires some regulatory control and the central banks periodically review the performance of PDs and make their operations performance-based. Rating of PDs as established in Poland is a laudable feature.

The RBI designed the system of Satellite Dealers (SDs) from 1996 as a second player in the Government Securities market after the PDs. The specific objective of SDs is to promote retail investments. However, the system could not prove as useful as expected and was eliminated.

 

Posted Date: 9/10/2012 7:45:23 AM | Location : United States







Related Discussions:- Role of primary dealers, Assignment Help, Ask Question on Role of primary dealers, Get Answer, Expert's Help, Role of primary dealers Discussions

Write discussion on Role of primary dealers
Your posts are moderated
Related Questions
Q. Advantages of Trade Credit? i) Easy Availability: Unlike other sources of finance, trade credit is relatively easy to obtain. Except in the case of financially very unsou


Principal repayment before the scheduled date is called a prepayment. Every individual borrower normally has the option to pay off all or part of their loan

(a) The term "financial reporting" incorporates not only financial statements, but also includes other means of communicating financial and non-financial information. Financial rep

What is the relationship between a bond's market price and its promised yield to maturity?  Explain. A bond's market price relies on its yield to maturity abbreviated as YTM.  Wh

Regulatory Framework Abroad A regulatory mechanism, in terms of finance, is the mechanism to regulate the working of the financial system. Its function is to ensure the complia

Under what circumstances would market to book value ratios be misleading?  Explain. The Market to Book ratio is helpful, but it is just only a rough approximation of how liquid

On 1 July 2006, Goela Ltd was registered and offered 1 000 000 ordinary shares to the public at an issue price of $1.70, payable as follows: 50c on application (due 31 August)

Basics of  Callable Bonds A callable bond is a convertible bond with the favorable feature of call option available to the issuer. When the fir

Functional Classification of Mutual Funds Functional classification of Mutual Funds is based on the basic characteristics of the mutual fund schemes for subscription. Mutual Fu