# Primary Dealer

Source: https://www.yieldcurve.pro/learn/primary-dealer

**Primary dealers** are a select group of financial institutions (currently about 25) that have a direct trading relationship with the Federal Reserve Bank of New York. They serve as the backbone of the Treasury market.

Primary dealers have two key obligations:

1. **Auction participation**: they must bid at every Treasury auction and are expected to take down a meaningful share of each offering. This ensures every auction clears, regardless of broader market conditions.
2. **Market making**: they are expected to make continuous two-sided markets in Treasury securities, providing liquidity to the broader market.

In return, primary dealers receive:

- **Direct access** to the Fed's open market operations
- **Information advantage** from seeing customer flow and auction order books
- **Financing access** through the Fed's repo facilities

At Treasury auctions, the share awarded to primary dealers versus [direct](https://www.yieldcurve.pro/learn/bid-to-cover) and [indirect bidders](https://www.yieldcurve.pro/learn/bid-to-cover) reveals the composition of demand. A high primary dealer share can indicate weak end-user demand (dealers taking down securities they'll need to distribute), while a low share indicates strong direct institutional interest.

Primary dealers also play a central role in the [repo market](https://www.yieldcurve.pro/learn/repurchase-agreement), financing their inventory positions and facilitating securities lending for the broader market.