First-level dealer(Primary Dealers) Fed Direct transaction financial institutions.These institutions are the opponents of the Fed’s operation, participating in the Federal Reserve Open market operation Among them, it includes buying and selling U.S.Treasury bonds, institutional bonds and other government securities.
For example, when the Federal Reserve adopts a quantitative easing (QE) policy, the Federal Reserve bought a large number of US Treasury bonds and MBS to fulfill.
First-level dealers are essential for the Fed’s realization of its monetary policy, helping the Fed to control the money supply and short-term interest rates, which affects the entire economy.
As of February 2024, there are 24 first-level dealers, the list is as follows 【source】 The
- ASL Capital Markets Inc.
- Bank of Montreal, Chicago Branch
- Bank of Nova Scotia, New York Agency
- BNP Paribas Securities Corp.
- Barclays Capital Inc.
- Bofa Securities, INC.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
- DAIWA CAPITAL Markets America Inc.
- Deutsche Bank Securities Inc.
- Goldman Sachs & Co.LLC
- HSBC Securities (USA) Inc.
- Jefferies LLC
- J.P.Morgan Securities LLC
- Mizuho Securities USA LLC
- Morgan Stanley & Co.LLC
- Natwest Markets Securities Inc.
- Nomura Securities International, Inc.
- RBC Capital Markets, LLC
- Santander us Capital Markets LLC
- Societe Generale, New York Branch
- TD Securities (USA) LLC
- UBS Securities LLC.
- Wells Fargo Securities, LLC
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What is the role of first-level dealers?
First-level dealers are financial institutions designated by the Federal Reserve, which are qualified to directly conduct trading of government securities with the Federal Reserve.
These institutions usually include Large bank As well as securities company and other Financial Services The company plays a central role in the US government securities market.
1.Assist the Federal Reserve to control economic activities
Federal Reserve Pass Open market operation Buying and selling U.S.Treasury bonds to control currency supply and short-term interest rates, which will affect economic activities.As a direct participant of these operations, first-level dealers help the Federal Reserve to achieve their monetary policy goals.
First-level dealers play a key role in the implementation of the Monetary policy of the Federal Reserve.When the Fed decides to expand or shrink the currency supply, this goal will be achieved through first-level traders.
For example, when the Federal Reserve adopts quantitative easing (QE), it will purchase US Treasury bonds directly from the first-level dealers and directly inject funds into the banking system.
Therefore, the first-level dealers are the core participants of the financial market, and they directly deal with the Federal Reserve, and play an indispensable role in implementing monetary policy and maintaining the stability of the financial market.
2.As a city merchant in the financial market
First-level trading providers purchase a large number of financial products to establish various financial products in inventory, including US Treasury bonds, MBS, corporate debt, etc.When there are opponents in the financial market that they want to buy financial products, the first-level trading merchant will be for it to be for the first-level trading merchant.It provides liquidity.
Similarly, if the opponent hopes to sell financial products, the first-level dealers will also receive the order to provide liquidity.
Therefore, first-level dealers provide market liquidity for various financial products and are important participants in the financial market.
First-level traders often get funds from the Money Market Funds by repo the repurchase market, thereby establishing the inventory of various financial products.
3.Provide funds for other financial institutions
First-level dealers also often provide funds for other financial institutions as the middle recipes of financial transactions.
For example, if a family Hedge Fund If you need funds, the first-level dealers can provide them with short-term loans.