BROWSE

Paper Dealer

What is 'Paper Dealer'

A market maker that buys and sells extremely short-term corporate bonds called commercial paper. A paper dealer is typically a large financial firm that has the capital and sophistication to distribute commercial paper to investors on behalf of borrowing corporations and to make a market in commercial paper, setting prices at which it is willing to buy and sell.

Explaining 'Paper Dealer'

Paper dealers are used by corporations that wish to access the public markets for their short-term borrowing needs. By issuing commercial paper, a corporation may be able to obtain a larger amount of financing and/or obtain a lower interest rate on its short-term borrowings, as compared to seeking a bank loan or other short-term credit facility.
Commercial paper is offered in a range of maturities, from a few days to several months. Occasionally, individual investors can buy commercial paper directly from the issuing corporation. However, it is more common for retail investors to invest in commercial paper through a money market fund or short-term bond fund.


Further Reading


Optimal dealer pricing under transactions and return uncertainty
www.sciencedirect.com [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

Financial intermediaries and monetary economicsFinancial intermediaries and monetary economics
www.sciencedirect.com [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

Auction markets, dealership markets and execution riskAuction markets, dealership markets and execution risk
ideas.repec.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

Primary dealers in government securities marketsPrimary dealers in government securities markets
ideas.repec.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

On dealer markets under competitionOn dealer markets under competition
www.jstor.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

When safe proved risky: Commercial paper during the financial crisis of 2007-2009When safe proved risky: Commercial paper during the financial crisis of 2007-2009
www.aeaweb.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

The failure mechanics of dealer banksThe failure mechanics of dealer banks
www.aeaweb.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …

The evolution of the US commercial paper market since 1980The evolution of the US commercial paper market since 1980
heinonline.org [PDF]
… dealer … On the supply side, work began with the paper by Demsetz (1968), and additional theoretical contributions were made by Tinic (1972) and Stoll (1978a … There are also a host of empirical papers on bid-ask spreads that have arisen out of this or closely related approaches …



Q&A About Paper Dealer


Are there any risks associated with investing in this type of security ?

Yes , there are risks involved when investing in this type of security . Investors should understand all aspects before making an investment decision .

What are some examples of maturities offered by commercial papers?

Commercial papers can be issued with maturities ranging from one day up to 270 days. Occasionally, individual investors can buy commercial papers directly from the issuing corporation but more often than not they invest in these securities through money market funds or short term bond funds.

Where can you find information about current offerings of commercial papers ?

You can find information about current offerings at www . sec . gov / cms / cmsin dex . htm .

How does a paper dealer make money?

The profit of the paper dealer comes from the difference between the price it pays for the bond and its selling price.

Who uses paper dealers?

Corporations use them to access public markets for their short-term borrowing needs.

What are some examples of money market funds ?

Some examples include Fidelity Cash Reserves ( FCRFX ) , Vanguard Prime Money Market Fund ( VMMXX ) , T Rowe Price Summit Municipal Money Market Fund ( PRMXX ) , Federated Government Oblig

Why would corporations want to do this instead of going to banks or other financial institutions?

By issuing commercial paper, a corporation may be able to obtain a larger amount of financing and/or obtain a lower interest rate on its short-term borrowings, as compared to seeking a bank loan or other short-term credit facility.

What is a paper dealer?

A paper dealer is a market maker that buys and sells extremely short-term corporate bonds called commercial paper.