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]
- Financial intermediaries and monetary economics – www.sciencedirect.com [PDF]
- Auction markets, dealership markets and execution risk – ideas.repec.org [PDF]
- Primary dealers in government securities markets – ideas.repec.org [PDF]
- On dealer markets under competition – www.jstor.org [PDF]
- When safe proved risky: Commercial paper during the financial crisis of 2007-2009 – www.aeaweb.org [PDF]
- The failure mechanics of dealer banks – www.aeaweb.org [PDF]
- The evolution of the US commercial paper market since 1980 – heinonline.org [PDF]