Presentation on Primary dealers system in India

1. Primary Dealers
-Harshad Jain

2. Primary Dealers
Primary Dealer

3. Primary Dealers
Objectives
1 . B r o a d B a s i n g : s t r engt h en i ng t he i n f ras t r u c t u r e
2 . D e v e l o p i n g c a p a b i l i t i e s : de v e l opme n t o f
u nderwr i t i ng and mar k et mak i ng capabi l i t i es .
3 . Improved t r a d i n g : to c o n t r i bu te f o r pr i c e
di s c o v er y , en han c ed l i qu i di t y and t u r no v er .
4 . Op e n ma r k e t o p e r a t i o n s : ef f i c i en t c o ndu c t o f
OMO.

4. Primary Dealers
Roles and Obligations
1 . Bidding: s hal l aggr egat i v el y bi d f o r mi n imum
amou n t s i n Cen t ral gov er nme n t dat ed s ec u r i t i es
and T - B i l l au c t i o n s .
2 . Underwriting : s hal l i n v ol v e t h ems el v es i n
u nd erwr i t i ng a pr e - de t e rmi n ed par t o f t h e s l ac k
i n s ubs c r i pt i o n /ac cept ed bi ds agai n s t no t i f i ed
amo u n t .
3 . O f f e r i n g quotes: s hal l o f f er 2 -way qu o tes
4 . Mai n tai n i ng Capi tal Adequacy S tandard (CAS):
mu s t mai n tai n CAS at t he l ev el pr e s c r i bed by R B I .

5. Primary Dealers
Promoting Primary Dealers
R B I ’ s m e a s u r e s t o p r o m o t e P D s
1 . I n f r a s t r u c t u r e : c r eat i o n o f nec es sar y i n s t i t u t i o nal
i n f ras t r u c t u r e
2 . F i n a n c i a l s u p p o r t : b y w a y o f ‘ R e p o ’ f a c i l i t i e s
agai n s t 9 1 -day T - B i l l s and go v er nmen t dated
s ec u r i t i es .
3 . Resources augmentation: permi s s i on to i s s u e
c ommer c i al paper s and to rai s e i n ter - c o rpo rate
depo s i t s .

6. Primary Dealers
Liquidity Support
R B I o f f e r s l i q u i d i t y s u p po r t t o PDs i n g o v e r nme n t
s e c u r i t i e s market i n the f o l l o w i n g manner
1 . Repos: t h r o ugh au c t i o n o f T -bi l l s and c e n t ral
go v er nmen t dated s e c u r i t i e s at t he ban k rate
2 . L i q u i d i t y : by l i n k i ng l i qu i di t y s uppor t to PDs
bi ddi ng c ommi tmen t s and s e c o nd ar y mar ke t
operat i o n s

7. Primary Dealers
Regulations
 Need to meet the requirements of SEBI
 Must join PDAI and FIMMDA
 Any changes in share holding pattern
needs approval from RBI
 RBI holds the right to cancel the Primary
dealership.

8. Supervision
 Must submit the periodic returns to RBI.
 On site inspection
Primary Dealers

9. Primary Dealers
Thank you