The Principal Dealer (PD) system in Malaysia was introduced in 1989 as part of initiatives to develop the primary and secondary markets of public debt securities. This includes building a stable demand for Government, Bank Negara Malaysia (BNM) issuances and trading these papers in the secondary market to create liquidity.

The increasing importance of Islamic finance and the prominent role played by the Islamic banks in supporting this development has prompted BNM to introduce the Islamic Principal Dealer (i-PD) system in July 2009 to complement the role played by the PDs. Under the PD and i-PD system, BNM appoints selected banking institutions based on a set of criteria, including their ability to handle large-volume transactions as measured by their participation in the primary market, secondary market trading volumes and their overall risk management capabilities.

PDs and i-PDs have the obligations of bidding for all Government and BNM papers in the primary market (i-PDs are required to bid for only Islamic Government and BNM papers), and to provide two-way price quotations for benchmark securities under all market conditions to ensure liquidity in the secondary market. 

For the obligations that PDs and i-PDs undertake, they are accorded certain privileges which, among others, include the ability to deduct the entire holdings of Government and BNM papers based on acquisition cost from the eligible liabilities (EL) base for Statutory Reserve Requirement computation.

BNM undertakes periodic assessments on PDs and i-PDs' performance in the primary and secondary markets to ensure that they perform their obligations effectively.

The list of PDs and i-PDs can be found on this page: Financial Institutions