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 behavior 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.
PDs are allowed the following activities as core
activities:
· Dealing and underwriting in Government securities.
· Dealing in Interest Rate Derivatives.
· Providing broking services in Government securities.
· Lending in Call/ Notice/ Term/ Repo/ CBLO market.
· Investment in Commercial Papers.
·
Investment in
Certificates of Deposit.
·
Investment in
debt mutual funds where entire corpus is invested in debt securities.