FE Report (July 02, 2011)
The central bank has extended the exclusivity of the primary dealers (PDs) for submission of bids in the primary auction of the government securities for one more quarter this year.
"Only the PDs will be allowed to submit the bid in the primary auction of government treasury bills and bonds for July-September period of this year," an executive director of the Bangladesh Bank (BB) told the FE Friday.
The system has been introduced aiming to broaden, and bring depth to, the secondary market of government securities, the BB executive said, adding that the system may be continued further, subject to its successful implementation.
The central bank introduced the system for the first time in Bangladesh for the April-June period this year to boost the country's secondary securities market through strengthening the activities of the PDs.
Under the system, non-PD banks and financial institutions will take part in the auction only through the PDs.
The PDs welcomed the central bank's latest move, saying that it would help bring dynamism to the secondary market of the government-approved securities.
"We expect that the system will continue in the near future to facilitate the PDs' performance," a senior member of the Primary Dealers Bangladesh Limited (PDBL) told the FE.
He also said the non-PD banks and financial institutions will have to buy the securities from the PDs to meet their statutory liquidity ratio (SLR) with the central bank.
The PDBL earlier urged the central bank not to allow the non-PD banks and non-banking financial institutions (NBFIs) to participate in the primary auction of the government securities.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust the government borrowing from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds -- five-year, 10-year, 15-year and 20-year -- are being traded on the market.
The central bank of Bangladesh earlier selected 15 PDs -- 12 banks and three NBFIs -- to handle government-approved securities in the secondary market.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations.
A PD will not short-sell any particular issue and will not hold a short position in secondary dealings. The PDs will not act as inter-bank or inter-dealer brokers, which has been specified in the guideline.
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