Primary Dealers (PDs) are financial investment firms and banks that take on the market-making obligation in the secondary market (KRX KTB), in return for their granted right to exclusively participate in the primary market. PDs are designated by the Minister of the Strategy and Finance among those which are licensed to be engaged in the investment trading business for the KTBs.


PDs are not only in charge of underwriting KTBs but also they carry the responsibility of frequently communicating with the government and participating in policy-making processes. The government hence requires aspiring PDs or PPDs to meet strict criteria, which include rich experiences in the management of KTBs, sufficient trading volume, strong financial standing, and the like.

For PD or PPD designation, the license for KTB investment trading business (underwriting included) is required pursuant to the Financial Investment Services and Capital Market Act (FSCMA). Also, requirements and standards on financial soundness, staffing, and performance should be met pursuant to the Regulations on KTB Issuance and PD Operation.

Rights and Incentives

Firstly, PDs can exclusively participate in the competitive auction for KTBs and underwrite up to 30% of the scheduled issuance volume. PPDs can participate and underwrite up to 15%. The purpose of granting rights to only PDs (PPDs) is to strengthen the link between their obligations and incentives, thereby ensuring the stable issuance of KTBs and reducing the borrowing cost.

PDs are also granted rights to non-competitive subscriptions. During three business days following a competitive auction, PDs can additionally purchase KTBs at the same yield as the highest auctioned yield at the competitive auction. The purchasable amount through the non-competitive process depends on their semi-annual PD assessment result.

In addition to the aforementioned rights, the financial support system is being operated to provide low-interest loans to PDs, using the government’s temporary surplus funds and taking their KTBs as collateral.


PDs have to fulfill the obligations set forth by the Minister of Strategy and Finance to maintain their PD qualification. When these obligations are fully met, PDs receive a full score in their quarterly PD assessment. Scores are deducted when their obligations are not met. As PPDs are limited in terms of how much they can underwrite and receive no incentives such as financial support and non-competitive subscription options, they are only subject to the obligations of placing bid/offer quotations, trading, and market-making of 10-year KTB futures.

Details of PD obligations are as follows:

  1. KTB Underwiting
    PDs are to underwrite at least 10% of the monthly issuance volume of each benchmark KTB.
  2. Placing Bid and Offer Quotations
    PDs are to submit at least ten bid and offer quotations for each benchmark KTBs in KRX KTB during the trading hours (exceptionally, five for 30-year KTB, three for KTBi)
  3. Trading Volume
    PDs are to trade more than 200% of the average KTB trading volume of either banks or securities firms (as for 10-year KTB futures, the average trading volume of the entire PDs).
  4. Holdings
    PDs are required to maintain the average balance of KRW 1 trillion in KTBs on their proprietary accounts each quarter
  5. Participation in Buy-Backs
    PDs are to take 5% of the total volume in buy-backs.