Primary Dealer

AAA

DEFINITION of '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 well as provide a valuable flow of information to the Fed about the state of the worldwide markets.

INVESTOPEDIA EXPLAINS 'Primary Dealer'

These primary dealers, which all bid for government contacts competitively, purchase the majority of Treasuries at auction and then redistribute them to their clients, creating the initial market in the process.

Some of the well-known primary dealers in the United States include Merrill Lynch, Citigroup, and Lehman Brothers.

RELATED TERMS
  1. Dealer

    A person or firm in the business of buying and selling securities ...
  2. Federal Reserve Bank

    The central bank of the United States and the most powerful financial ...
  3. Blind Brokering

    When brokerage firms ensure anonymity to both the buyer and the ...
  4. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  5. Broker

    1. An individual or firm that charges a fee or commission for ...
  6. U.S. Treasury

    Created in 1798, the United States Department of the Treasury ...
RELATED FAQS
  1. What is the Federal Reserve Board's market risk capital rule?

    The Federal Reserve Board’s market risk capital rule, or MRR, sets forth the capital requirements for banking organizations ... Read Full Answer >>
  2. How does the law of supply and demand affect monetary policy in the United States?

    The law of supply and demand affects monetary policy in the United States through the adjustment of interest rates. Interest ... Read Full Answer >>
  3. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  4. What is the relationship between modified duration and interest rates?

    Modified duration is a formula that measures the value of a bond in relation to changes in interest rates. Modified duration ... Read Full Answer >>
  5. What nations other than the U.S. have risk-free interest rates?

    Countries other than the United States that have risk-free interest rates are Canada, the European Union, Japan, the United ... Read Full Answer >>
  6. What are the risks associated with investing in a treasury bond?

    It's common for financial analysts and investment publications to refer to U.S. Treasury bonds (T-bonds) as risk-free investments. ... Read Full Answer >>
Related Articles
  1. Bonds & Fixed Income

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  2. Mutual Funds & ETFs

    The Bond Market: A Look Back

    Find out how fixed-income investments evolved in the past century and what it means today.
  3. Bonds & Fixed Income

    Retail Notes: A Simpler Alternative To Bond Funds

    These securities are meant to be held until maturity, removing the burden of complex pricing that sometimes plagues bonds.
  4. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  5. Economics

    Will The US Economy Rebound In The 2nd Quarter?

    Most investors know that U.S. 1st quarter growth numbers aren’t pretty. Economic statistics have been missing expectations by the largest margin since 2009
  6. Investing Basics

    Treasury Inflation-Protected Securities (TIPS)

    Treasury inflation-protected securities are treasury securities that make adjustments for inflation as reflected in the Consumer Price Index.
  7. Investing Basics

    What is the Coupon?

    In the financial world, “coupon” represents the interest rate on a bond.
  8. Economics

    The U.S. Economy May Be Stronger Than You Think

    While the economic performance in the U.S. broadly disappointed in the first quarter, temporary factors presented one-off events that depressed output.
  9. Retirement

    Facing Retirement? Look Beyond 100% Bonds

    Retiring doesn't mean putting all your money in bonds. There are two things to consider when it comes to be invested in bonds: growth and inflation.
  10. Mutual Funds & ETFs

    Is the PowerShares (PFEM) ETF a Good Bet Now?

    What you need to know if you are considering trading PowerShares Fundamental Emerging Markets Local Debt ETF.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center