Primary dealers are Wall Street firms that do business directly with the Fed and the Treasury Department. They are the Fed's counterparties in open market operations, and they are required to submit meaningful bids when new Treasury securities are auctioned. Accordingly, primary dealers trade Treasuries and typically also trade spread product.
Being a primary dealer is still a status symbol because of the capital requirements firms must meet, but not as much of one as it used to be. Eroding profitability in the government bond business as interest rates declined over the course of the 90s prompted many firms to cast off the mantle. Financial-services mergers have also taken their toll.