The primary purpose of this study is to analyze and discuss the impact of the primary dealership mechanism utilized in relation to the issuance of Government Domestic Borrowing Securities (GDBS) on the financial structures of the banks. Subsequent to a thorough research and an adequate literature scan on the origins and development of the primary dealer system, our analytical approach is pillared initially on expounding on the core elements of the model, while summarizing financial data of the PD banks and NPD banks under coverage. In the same context, the discriminant analyses are aimed at exploring and revealing how PD banks and NPD banks are decoupled and disengaged in regard to their financial ratios, as well as illustrating the effect of capital ownership and the scale factor on the underlined differentiation. Consequentially, it has been ascertained through the findings of the analyses that i) some ratios have engendered a meaningful segregation of the PD banks and NPD banks, and ii) they have precipitated virtually no discernible distinction among the non-resident banks in regard to their functions as a primary dealer, iii) the financial structure of small-scale PD banks were observed to have sustained fiscal duress and constraints, while the disparity and divergence among large-scale banks became more manifest, delineated into PD banks and NPD banks in more explicit terms, and iv) the prevalence of an effect on the ownership configuration of the PD banks were encountered to be less frequent.

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An Analysis of the Disparities, Divergences and Differences in Financial Structures of Primary Dealer (PD) Banks and Non-primary Dealer (NPD) Banks

Does the decision of human intermediaries to provide matching services depend critically on compensations for intermediation. This paper argues that the answer is yes for the widely prevalent primary dealer system to issue government securities in which the issuer imposes participation obligations on human intermediaries and compensates them with rents conditional on compliance. A unique data set from the Government of Canada securities auctions is utilized to show that the matching services of primary dealers are necessary in forestalling under subscribed auctions, and that the primary dealers respond strongly to the compensations offered by the issuer.

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Samita Sareen

Papers

Commodity Bundling in Government Securities Auctions: An Analysis of the Primary DealerModel in Canada