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. How can I create a yield curve in Excel?

    You can create a yield curve in Microsoft Excel if you are given the time to maturities of bonds and their respective yields ... Read Full Answer >>
  2. What are the different formations of yield curves?

    There are three main different formations of yield curves: normal, inverted and flat yield curves. The yield curve describes ... Read Full Answer >>
  3. What are the different types of margin calls?

    Margin is much like buying stocks on loan. An investor borrows funds from a brokerage firm to purchase stocks and pays interest ... Read Full Answer >>
  4. What is the difference between the rule of 70 and the rule of 72?

    The rule of 70 and the rule of 72 give rough estimates of the number of years it would take for a certain variable to double. ... Read Full Answer >>
  5. On what basis does the sustainable growth rate fluctuate?

    The main difference between a bond’s yield to maturity, or YTM, and the spot rate is that the YTM uses the same interest ... Read Full Answer >>
  6. What are some classes I can take to prepare for the Series 6 exam?

    The risk-return tradeoff for bonds is the increased yield investors can obtain from corporate and other types of bonds that ... 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. Investing

    What A Rate Hike May Mean For Stocks

    By the end of the year, investors will likely be contending with the first Federal Reserve (Fed) rate hike in nearly a decade.
  6. Professionals

    Why You Should Avoid Fixating on Bond Duration

    Financial advisors and their clients should then focus on a bond fund’s portfolio rather than relying on any single metric like duration.
  7. Investing

    The Case For Stocks Today

    Last week, U.S. equities advanced with the S&P 500 Index notching new records. Investors are now getting nervous with rate and currency volatility spiking.
  8. Mutual Funds & ETFs

    Why You May Want To Be (And Stay) In Bonds

    Bonds are complicated, and it’s easy to feel intimidated or confused. Fortunately, you don’t need to be a numbers geek to be an informed investor.
  9. Investing

    Why Some Investors Are Tilting Toward TIPS

    Last month’s five-year TIPS auction drew nearly $48 billion in interest, a sign of recent renewed demand for this inflation indexed asset among investors.
  10. Mutual Funds & ETFs

    The EMAG Emerging Mkts Bond ETF: Worth the Risk?

    The Market Vectors Emerging Markets Aggregate Bond ETF (EMAG) might offer long-term rewards, but is now the best time to jump in?

You May Also Like

Hot Definitions
  1. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  4. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  5. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  6. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
Trading Center