A primary dealer system is a form of partnership between the issuer and financial institutions, the purpose of which is the implementation of a single strategy for strengthening and developing the functionality of the primary placement and secondary trading of securities.
Primary dealer system in Latvia has been launched on 11 February, 2013.
The objective of introducing this system is to stimulate activity and development of the government debt securities market – new borrowing instruments, broadening of investor base, more active, liquid and attractive securities market for investors, as well as to reduce risks associated with servicing government debt.
Two-way quotes in the secondary market shall be provided for the following government securities and at any time subject to the primary dealer having the relevant paper on the trading book:
- for series of bonds with the nominal amount outstanding of at least EUR 50 (fifty) million and more than 3 (three) calendar months remaining until.
- for series of bills with the nominal amount outstanding of at least EUR 20 (twenty) million and more than 3 (three) calendar months remaining until maturity;
Actual benchmark securities:
|ISIN CODE||Date of Maturity||Type of Security||Amount outstanding at nominal values, EUR|
|LV 00005 50101||20.Mar.2022.||2 yer T-bonds||401 500 000,00|
LV 00005 80058
10 year T-bonds
64 541 465,30
|LV 00005 70158||12.May.2023||5 year T-bonds||270 000 000,00|
|LV 00005 70166||02.Nov.2023||5 year T-bonds||250 000 000,00|
|LV 00005 70174||31.Jan.2025||5 year T-bonds||390 001 000,00|
|LV 00005 70182||03.Jul.2027||7 year T-bonds||80 000 000,00|
Two-way quotes provided by primary dealers are available in:
- Bloomberg (LATVGB un LATVTB)
- NASDAQ Riga electronic trading system Genium INET.
Main obligations of primary dealers:
- to act as intermediaries between the issuer and the investor by way of distributing the securities purchased and facilitating the broadening of the investor base;
- to ensure the liquidity of the government debt securities market by promoting secondary trading and the effective pricing of securities;
- to provide reports to the Treasury regarding transactions with Latvia government securities.
Main rights of primary dealers:
- to participate in the primary placement of government domestic debt securities and other government domestic borrowing transactions;
- to receive the status of a primary dealer of government securities.
The Treasury concludes an Agreement with each primary dealer on participation in organizing the government domestic debt securities primary and secondary market.
The Agreement with primary dealers is standardised and the form is available here:
Reports on government securities:
Auction participants – Primary dealers - shall provide the Treasury with the information on primary and secondary market trades executed during the previous month in the Harmonised Reporting Format as agreed by the EFC Sub-Committee on EU Sovereign Debt Markets. Later on this informations is consolidated into the Euro Market Activity Report (EMAR).
The trades to be reported include Latvia government securities in both domestic and international markets and denominated in euros.
Primary dealers submit reports on transaction in XML format to the Treasury (firstname.lastname@example.org).
Guidelines on HRF (Format 2021)
More information on the Harmonised Reporting Format can be found on the EFC Sub-Committee on EU Government Bonds and Bills Markets' website.
Consolidated euro area primary dealer activity reports EMAR can be found here.
The size of the primary dealer group in Latvia has been assessed based on the number of market participants at government debt securities auctions, as well as their activity in terms of bidding and security purchases, and from the point of view of attracting potential investors from Latvian and international financial and capital markets.
The group of primary dealers has changed slightly since its launching and currently it is as follows:
- Citadele banka (with regards to primary and secondary market issues);
- Erste Group Bank AG (with regards to primary and secondary market issues);
- Luminor Bank AS (with regards to primary and secondary market issues);
- SEB bankas (with regards to primary and secondary market issues);
- Swedbank (with regards to primary and secondary market issues).
Any other market participants will also be able to claim the status of a primary dealer by qualifying certain criteria and submitting an application to the Treasury and providing additional information by the request of the Treasury.
The Treasury evaluates the candidates of the primary dealer using various criteria:
Primarily by eligibility criteria, for example, the candidate is a credit institution and a member of the NASDAQ OMX Riga exchange, and must meet the requirements of laws and other regulatory enactments; also the evaluation is made by the assessment of the bank’s performance in the primary and secondary market of government domestic debt securities to date, and its activity and participation in financial transactions with the Treasury both in terms of government debt and asset management; and by the assess of the candidate's cooperation so far and by other aspects.
The detailed qualification criteria for a primary dealer candidate can be find here.