Master Direction – Operational Guidelines for Primary Dealers

Question 1

The objectives of the PD system are to strengthen the infrastructure in G-Sec market, development of underwriting and market making capabilities for G-Sec, improve secondary market trading system and to make PDs an effective conduit for …………………

Answer 1

open market operations (OMO)

Question 2

Banks which do not have a partly or wholly owned subsidiary undertaking PD business and intending to undertake PD business departmentally should maintain

Answer 2

Net worth of Rs 1000 Cr, CRAR – 9%, NPA less than 3%, profit making for previous 3 years.

Question 3

In-principle approval for PDs is given by …………………………… Department in RBI,

Answer 3

IDMD

Question 4

PDs are expected to join ……………………………. and ……………………………… and abide by the code of conduct framed by them and such other actions as initiated by them in the interest of the securities markets.

Answer 4

Primary Dealers Association of India (PDAI) and Fixed Income Money Market and Derivatives Association (FIMMDA)

Question 5

A PD should annually achieve a minimum turnover ratio of ……… times for Government dated securities and ……. times for T-Bills/CMBs of the average month-end stocks.

Answer 5

5, 10

Question 6

……………………………………………….. security refers to a security that has been authorized for issuance but not yet actually issued.

Answer 6

“When, as and if issued” (commonly known as ‘When Issued’)

Question 7

Individuals, (HUF), (NRI) and (OCI) are eligible to undertake …………………….. in ‘When Issued’ securities

Answer 7

only long position

Question 8

Limits for long and short positions in When Issued Markets for PD and SCBs

Answer 8

Not Exceeding 25% of Notified amount.

Question 9

Limits for long and short positions in When Issued Markets for other entities

Answer 9

Long – 25% and Short 10% of Notified amount

Question 10

All OTC When Issued transactions shall be reported to ………… within 15 minutes of the trade

Answer 10

NDS-OM

Question 11

Any violation of regulatory guidelines noticed in this regard should immediately be reported to the ……………………………..

Answer 11

Public Debt Office (PDO), Mumbai and Financial Market Regulation Department (FMRD), Reserve Bank of India

Question 12

“…………..” means sale of a security one does not own.

Answer 12

Short Sale

Question 13

Limit of Short Sale by eligible institutions?

Answer 13

Liquid Securities – 2% of the total outstanding stock of each security or Rs 500 Crore whichever is higher and Other Securities – 1% of the total outstanding stock of each security or Rs 250 Crore whichever is higher