Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata basis in all Treasury auctions at reasonably competitive prices.
Disclaimer
The Federal Reserve Bank of New York's relationships with private sector counterparties described in this policy are business, not regulatory, relationships entered into by the New York Fed for the purposes described herein. That a firm is a New York Fed counterparty is not an endorsement of the firm by the New York Fed and should not be used as a substitute for independent analysis and due diligence by other parties considering a business relationship with the firm.
Role of primary dealers in New York Fed market operations
Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a pro-rata1 basis in all Treasury auctions at reasonably competitive prices.
Primary dealers are expected to participate in open market operations consistently and competitively, in a variety of market environments, to support the implementation of monetary policy. In particular, a primary dealer is expected to participate consistently in any Treasury outright operations that are conducted by the New York Fed's Trading Desk (Desk). If a primary dealer is active in agency mortgage-backed securities (MBS), it is also expected to participate in any Desk operations in these instruments at a level commensurate with its presence in these markets. Primary dealers are eligible to participate in the New York Fed's Standing Repo Facility (SRF) and Overnight Reverse Repo facility. To maintain operational readiness, primary dealers are expected to periodically conduct test transactions and participate in resiliency exercises.
The Desk also expects primary dealers to provide ongoing insight into market developments in its daily market monitoring activities to support the formulation and implementation of monetary policy. Primary dealers are expected to submit weekly activity reports on form FR2004, and are expected to respond to periodic surveys.
Primary dealers are eligible to participate in the New York Fed’s securities lending program, which is designed to help ensure the effective conduct of open market operations.
Eligibility criteria
In order to be eligible as a primary dealer, a firm must:
- Be either (1) a broker-dealer2 or government securities broker-dealer, registered with and supervised by the Securities and Exchange Commission (SEC) and approved as a member of the Financial Industry Regulatory Authority, Inc., and that has net regulatory capital3 of at least $50 million4 or (2) a state or federally chartered bank or savings association (or a state or federally licensed branch or agency of a foreign bank) that is subject to bank supervision,5 and that maintains at least $1 billion in Tier 1 capital.6
- Demonstrate a substantial presence as a market maker7 that provides two-way liquidity in U.S. government securities, particularly Treasury cash and repo operations, for at least one year prior to the application date;8
- Maintain a share of Treasury market making activity of at least 0.25 percent.9
- Demonstrate a capability to bid on a consistent basis for its pro rata share of auctions of Treasury securities, based on the number of primary dealers at the time of the auction. Its bid prices should be reasonably competitive when compared to the range of rates trading in the when-issued market, taking into account market volatility and other risk factors.
- If a branch, agency or subsidiary of a non-U.S. bank or holding company, that bank or holding company must be domiciled in a country that extends the same competitive opportunities to U.S. companies as it extends to domestic firms for the underwriting and distribution of national debt issuance.10
- Have, or have arrangements for another party to provide services of, a "back office" of sufficient size and experience to be able to (1) confirm and arrange settlement of transactions with the New York Fed and (2) support settlement of trading at the volume levels expected by the New York Fed.
- Have the operational and financial capacity to post margin for MBS transactions when needed.
- Clear through one of the U.S. clearing organizations with which the New York Fed has a clearing relationship, and have already established triparty repo/reverse repo settlement arrangements with such organizations.
- Be a participant in the central counterparty service for the government securities market—DTCC’s FICC-GSD—to support clearing of primary market transactions.
- Have disaster recovery capabilities, reflected in their Business Continuity Plans (BCPs) and routinely tested, that ensure that robust end-to-end participation in Treasury auctions and Desk operations (including trading, clearing and settling) will occur even amid a wide-scale disruption in the firm’s primary front and back office locations by employing geographic dispersion between primary and secondary locations.
Once onboarded, primary dealers are expected to continue to meet these expectations and eligibility criteria on an ongoing basis.
Firms should contact the New York Fed at PDInfo@ny.frb.org before formally expressing interest in becoming a primary dealer and providing the requested information.
Expression of Interest Form for Primary Dealers
Primary dealers are required to provide data on their market activity. The New York Fed expects primary dealers to submit accurate data, but it does not audit the data.
Primary dealers report their trading activities and their cash and financing positions in Treasury and other securities on a weekly basis. Though the New York Fed expects primary dealers to report accurately, the New York Fed itself does not audit the data.
Primary dealers are surveyed on their expectations for the economy, monetary policy, and financial market developments before Federal Open Market Committee meetings through the Survey of Market Expectations. From 2002 to 2024, primary dealers' responses were collected via the Survey of Primary Dealers. Survey questions and aggregated results have been published in PDF format starting with the January 2011 survey and in data file format starting with the July 2023 survey. In January 2025, the Survey of Primary Dealers was combined with the Survey of Market Participants into the Survey of Market Expectations.
Learn more and find past surveys and results.
