Dhaka, Bangladesh (BBN)- The central bank has revised the underwriting obligations of primary dealer (PD) in primary auctions of the government securities aiming to brining dynamism in the secondary securities market.
The revised underwriting obligations, which have been re-fixed after appointment of four new PDs, came into effect from December 1 this year, officials said.
The four new PDs are Mercantile Bank Limited, Mutual Trust Bank Limited and non-banking institutions LankaBangla Finance Limited and IPDC.
With the addition of the new four, the number of PDs now stands at 13. Of them, 10 are commercial banks and three non-banking financial institutions (NBFIs).
“We’ve revised the underwriting obligations of the PDs aiming to bring dynamism in the country’s secondary securities market,” a senior official of the Bangladesh Bank (BB) said, adding that the central bank reviewed the underwriting obligations considering the statutory liquidity ratio (SLR) requirements of the respective PDs.
The central bank has already issued a circular in this connection and asked the chief executives and managing directors of the PDs banks and NBFIs to maintain the obligations properly.
Under the revised provisions, three state-owned commercial banks (SCBs) – Sonali, Janata and Agrani -will have to maintain 10 percent of underwriting obligations in primary auctions of the government securities instead of 12.50 percent earlier.
On the other hand, the underwriting obligations for Jamuna Bank Limited has been re-fixed at 8.50 percent instead of 11.50 percent while three NBFIs will have to maintain 2.50 percent at the time of auctions.
Besides, six other private commercial banks will have to maintain 9.00 percent underwriting obligations in the auctions, according to the revised provisions.
The central bank has already amended the guidelines for PDs allowing commission and liquidity support to activate the secondary securities market.
“The PDs will be paid underwriting commission at a rate as may be determined by the government from time to time,” the central bank said in its amended guidelines, issued earlier.
The PDs will subscribe and underwrite primary issues and make secondary trading deals with two-way price quotations, according to the guidelines.
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.
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 – 5-year, 10-year, 15-year and 20-year –are being traded in the markets.
BBN/SS/SI/AD-02December09-7:56 pm (BST)
