Dhaka, Bangladesh (BBN)- The government has agreed to offer higher underwriting commission for treasury bills and bonds for top three primary dealers (PDs) aiming to bring dynamism in the secondary securities market, officials said.
The central bank will select the top PDs considering their performance on participations in the primary auction and transactions of the government-approved securities in the secondary market on quarterly basis.
Under the initial decision, the top PDs will receive 0.030 per cent (3.0 paisa) instead of 0.025 per cent (2.50 paisa) as underwriting commission for the government approved treasury bills and 0.080 per cent (8.0 paisa) instead of the existing 0.075 per cent (7.5 paisa) for the bonds.
"We'll offer the higher underwriting commission to the top PDs in line with the decision of the committee on cash and debt management," a senior official of the Bangladesh Bank (BB) said.
Currently, a high-powered committee on cash and debt management, headed by the finance secretary, is now working on the separation of the cash management from that of the public debt management.
Besides, the central bank will sit with the PD banks and financial institutions on August 12 to review the overall secondary market situation, the BB officials added.
"The government has agreed to offer such incentive aiming to boost the country's secondary securities market through creating competition among the PDs," the BB official said, adding that the central bank will also seek opinions from the PDs in this connection
"We'll send a proposal relating to the offer of the higher underwriting commission to the top PDs to the ministry of finance for final approval," another BB official noted.
Earlier, the central bank selected nine PDs – eight banks and a non-banking financial institution (NBFI) – to handle government-approved securities and issued a guideline for them.
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 as specified in the guideline.
BBN/SS/SI/AD-10August09-11:04 am (BST)