Dhaka, Bangladesh (BBN)- The government will 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.
“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.
“The government has agreed to offer such incentives aiming to boost the country’s secondary securities market through creating competition among the PDs,” the BB official noted.
He also said the central bank on Wednesday sought opinion from the PDs by August 18 for fixation of criteria to select top three PDs for providing higher underwriting commission for treasury bills and bonds quarterly.
“We’ll finalize the criteria after scrutinizing the PDs’ opinions,” another BB official said, adding that the central bank would submit the final proposal in this connection to the finance ministry for approval.
The PDs have urged the central bank to review the proposed criteria giving emphasis on secondary trading of the government securities instead of success ratio in primary auction to bring dynamism in the secondary market.
The appeal was made at a meeting with the BB officials, held in the central bank on Wednesday with its Senior Executive Director Khandakar Muzharul Haque in the chair.
“We’ve requested the BB to revise the proposed criteria for selection of top three PDs considering higher weight on secondary market trading of securities than success ratio in the primary auction to facilitate the secondary market,” a senior PD said.
The top PDs will be selected on the basis of both success ratio in primary auction and trading of government securities in secondary market.
Weight on success ratio and secondary trading will be equal for selection of top three PDs, according to the BB’s existing proposal.
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-13August09-12:57 am (BST)