NY Fed names two primary dealers, list grows to 22

A Bank of Montreal sign is pictured in downtown Ottawa March 3, 2009. REUTERS/Chris Wattie

NEW YORK (Reuters) - The Federal Reserve Bank of New York on Tuesday granted primary dealer status to two large bond dealers, Bank of Nova Scotia BNS.TO and BMO Capital Markets BMO.TO, bringing the total number of primary dealers to 22.

The announcement comes as some of the financial firms on the primary dealer list, including French banks Societe Generale SOGN.PA and BNP Paribas BNPP.PA, are being rocked by the euro zone debt crisis.

Tuesday's additions are the first since February, when the New York Fed added SocGen and MF Global Holdings Ltd MF.N to the list.

Primary dealers are the financial firms with special permission to bid directly on behalf of their clients at Treasury auctions and help the Federal Reserve carry out monetary policy.

They are required to place bids at every Treasury auction, and they take on to their own balance sheets the Treasury debt they do not immediately sell to customers.

The coveted designation is seen as a status booster and a stamp of approval by the Fed. But it is often not a lucrative business on its own.

Qualifying to be a primary dealer grew more difficult recently after the New York Fed set new capital levels as well as other more stringent requirements for applicants in January


The two new additions to the primary dealer list are both Canadian bank subsidiaries. A third Canadian institution, TD Securities TD.N, has been waiting for approval to become a primary dealer since at least July 2009.

Additional reporting by Chris Reese; Editing by Padraic Cassidy