Dhaka, Bangladesh (BBN)- The central bank of Bangladesh has allowed only primary dealers (PDs) to submit bids in the primary auction of the government securities for the next quarter of this year, officials said.
"The central bank has decided that only the PDs will submit the bid in the primary auction of government treasury bills and bonds for April-June period of this calendar year," the Executive Director of the Bangladesh Bank (BB), the country’s central bank, Harun-Ur-Rashid Chowdhury said, adding that non-PD banks and financial institutions will take part in the auction only through the PDs.
This newly introduced system may be continued further, subject to successful implementation of the system, the central bank said in its circular, issued on Wednesday.
"This system has been introduced to broaden, and bring depth to, the secondary market of government securities," the BB said.
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.
"It will be helpful for encouraging a sort of new dynamism in the secondary securities market," a senior member of the Primary Dealers Bangladesh Limited (PDBL) said.
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.
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).
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.
BBN/SI/AD-18Mar11-6:52 pm (BST)