|
Feature |
Primary
Dealer (PD) |
Authorize
Dealer (AD) |
|
Definition |
Primary
Dealers are financial institutions authorized by a central bank or a
government to participate directly in primary market for government securities |
Authorized
dealers are financial institutions authorized by a central bank to deal in
foreign exchange and manage foreign exchange transactions |
|
Primary
Function |
To
underwrite and market new issues of government securities, ensuring the
distribution and liquidity of government debt. |
To
facilitate foreign exchange transactions, including buying and selling
foreign currencies and managing foreign exchange accounts. |
|
Role in
Monetary policy |
Assist
the central bank in implementing monetary policy by participating in open
market operations (OMOs) |
Support
the central ban in managing the country’s foreign exchange reserves and
exchange rate policies |
|
Example
of Transaction |
Underwriting
government bonds, T-bills, and other government securities; participating in
auctions of government securities. |
Buying
and selling foreign currencies, issuing letters of credit, handling foreign remittances,
and managing foreign currency accounts. |
|
Risk Management |
Manage
interest rate risk, liquidity risk and credit risk associated with government
securities. |
Manage
currency risk, credit risk and liquidity risk associated with foreign
exchange transactions. |
|
Impact
on Financial Markets |
Ensure
the smooth functioning and liquidity of the government securities market,
aiding in the implementation of fiscal and monetary policies. |
Facilitating
international trade and investment by providing foreign exchange services,
contributing to the stability of the foreign exchange market. |