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Secondary T-bill market

BB issues guideline for primary dealership

REJAUL KARIM BYRON
Bangladesh Bank sent a guideline specifying modus operandi of primary dealers (PDs) in the secondary treasury bill market to banks and financial institutions yesterday.
In a circular, the central bank has invited applications for primary dealership. The aspirant dealers must submit their applications by August 21.
The primary dealers will operate and conduct transactions of treasury bills in all primary auctions and issues of treasury bills and tradable securities.
Bangladesh Bank (BB) will select PDs from the scheduled banks and financial institutions holding current accounts with the BB in fulfillment of Cash Reserve Requirement.
To select a PD, the central bank will examine the physical infrastructure, geographical coverage of branches, use of computers and
information technology in record keeping and analysis of day to day transactions of the intending applicants.
The central bank will also check the solvency and the overall standard of the applicant's compliance with the regulatory bodies.
Selected PDs will be eligible for liquidity support from the BB for its operations, collateralised by treasury bills and government securities, through REPO mechanism or such other arrangements the BB may prescribe time to time.
On the roles and responsibilities of the PDs, the guideline says they will be required to maintain success ratios of 40 per cent or higher in bids of the primary issues of treasury bills and underwriting of primary issues of dated government securities over a year.
They will also have to engage themselves actively in secondary trading, quoting firm two-way prices and keeping its trading window open throughout each
business day.
About the operating regulations of the PDs, the guideline said a PD should maintain separate accounts in respect of its own positions and customer transactions, with separate subsidiary general ledger (SGL) account in the name of each customer.
For bids in primary issues on behalf of customers, a PD should quote the price as indicated by the customer, the guideline says.
It specifies that a PD would quote the prices in terms of face value units Tk 100.
A two-way price quote of Tk 101 or 101.5 would indicate premium of Tk 1 and Tk 1.5 for bid and offer, while a quote of Tk 98.5 or Tk 99 would indicate discount of Tk 1.5 and Tk 1 on bid and offer, the paper said.
"The bid and offer prices may differ for deals of different sizes, but in no case, the bid-offer should not spread more than Tk 0.5," said the paper.