What are primary dealers? How are they involved in open market operations?
The Federal Reserve Bank of New York conducts open market operations for the Federal Reserve, under an authorization from the Federal Open Market Committee. The group that carries out the operations is commonly referred to as “the Open Market Trading Desk” or “the Desk.” The Desk is permitted by the FOMC’s authorization to conduct business with U.S. securities dealers and with foreign official and international institutions that maintain accounts at the Federal Reserve Bank of New York. The dealers with which the Desk transacts business are called primary dealers. The Federal Reserve requires primary dealers to meet the capital standards of their primary regulators and satisfy other criteria consistent with being a meaningful and creditworthy counterparty. All open market operations transacted with primary dealers are conducted through an auction process. For more information on open market operations and primary dealers, see The Federal Reserve System: Purposes and Functions, page 38.
