The relevance of primary dealers for public bond issues

  • We analyze the role of different kinds of primary and secondary market interventions for the government's goal to maximize its revenues from public bond issuances. Some of these interventions can be thought of as characteristics of a "primary dealer system". After all, we see that a primary dealer system with a restricted number of participants may be useful in case of only restricted competition among sufficiently heterogeneous market makers. We further show that minimum secondary market turnover requirements for primary dealers with respect to bond sales seem to be in general more adequate than the definition of maximum bid-ask-spreads or minimum turnover requirements with respect to bond purchases. Moreover, official price management operations are not able to completely substitute for a system of primary dealers. Finally it should be noted that there is in general no reason for monetary compensations to primary dealers since they already possess some privileges with respect to public bond auction.

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Author:Wolfgang Breuer
Parent Title (German):Institut für Kapitalmarktforschung (Frankfurt am Main): CFS working paper series ; No. 1999,11
Series (Serial Number):CFS working paper series (1999, 11)
Publisher:Inst. für Kapitalmarktforschung
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:1999
Year of first Publication:1999
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2005/06/13
Tag:bond auctions; market makers; official market interventions; primary dealers; public bonds
GND Keyword:Deutschland; Bundesanleihe; Konsol; Staatsanleihe; Zwangsanleihe; Börsenzulassung; Going Public; Wertpapieremission; Effektenbank; Emissionsgeschäft; Börsenmakler; Börsenhändler; Debt Management; Mikrostrukturtheorie <Kapitalmarkttheorie>
Issue:February 1999
Page Number:64
Last Page:62
Source:CFS working paper ; 1999,11 revidierte Fassung
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht