Primary distributors offer offers and question prices on the secondary market for government bonds, which are the main government bonds. In the case of an agency agreement, new expenses are sold by the „best effort“ merchants. The issuer decides how much financing is needed and the merchant consortium asks investors for interest. However, distributors do not undertake to purchase parts of the program that are not sold if demand is lower than expected. In an agency contract, issuers and traders enter into an agency agreement specifying the specific terms of the commitment as well as the obligations of each parity. In the primary debt market, traders provide distribution skills and capabilities to issuers interested in fundraising. They are the financial intermediary that connects the issuer to investors. In other words, they help issuers sell the new issue to investors. In this regard, the issuer and traders agree on the amount of commitment to traders in the new debt offer.
Distributors take different risks for the offer depending on the nature of this agreement. Collaboration with primary traders is based on the contract of primary traders: Primary Dealer Agreement 2020 (pdf) SO – SSV nominal government bonds – TREASURy bills RO – Inflation-linked bonds An offer is often combined with a request for approval to address the problem of unpaid bonds of bondholders who refuse supply. Bondholders may be „encouraged“ to participate in the call offer (by inserting a call option or a federal stripping), as they still have a much less attractive investment. The Republic of Finland currently has 14 primary traders. Primary trading banks play an important role in the implementation of government bonds and in guaranteeing secondary market liquidity. The State Ministry of Finance generally selects primary traders who act as leading banks for the organization of trade union issues. They also have the right to participate in auctions organized by the public treasury. Bondholders may be offered incentive fees for debt management exercises related to English bonds, provided they do not insult the passu treatment of bondholders, i.e. they are offered to any bondholder, even if they are ultimately paid only to those who consent to them. Funds raised on the sale of a new issue of an agency are deposited into a separate receiver account for the good of investors. When the issue is complete, the funds are returned to investors and no other orders are received. If the issue is successful, most of the funds will be transferred to the issuer, with merchants receiving a small portion as a fee.