STAR BUSINESS REPORT

Primary dealers, which are authorised traders of government securities, must each attain annual turnovers of at least Tk 3,000 crore in the secondary market, as per new Finance Division guidelines.

The turnover can also be equal to their yearly stock under the statutory liquidity rate (SLR), if it is higher, or as determined by the Finance Division from time to time.

The SLR is the minimum percentage of deposits that must be held in liquid assets like cash, gold, or government securities.

Still, at least 25 percent of the required turnover must be attained in each quarter.

Published on July 8, the comprehensive set of guidelines is for banks, finance companies, and their subsidiaries to fulfil a wide range of technical, operational, and financial criteria to qualify and continue operating as primary dealers.

There are 24 primary dealers in the country, as per Bangladesh Bank (BB).

The move is part of a broader strategy to modernise public debt management, support government financing through a robust and transparent securities market, enhance liquidity, and develop the investor base to strengthen the bond market.

The Finance Division shall develop the regulatory guidelines for establishing standalone primary dealers in consultation with the BB when deemed appropriate.

The criteria for selection, obligations, roles and responsibilities, as well as the performance evaluation process of standalone primary dealers, shall be incorporated into these guidelines when deemed appropriate.

The Finance Division is authorised to appoint primary dealers or reject the applications submitted by a bank, finance company or their subsidiary to act as primary dealers.

This authority will be based on the assessment of market needs, the applicant’s suitability, and the value added to the system, said the guidelines.

Primary dealers will have to focus solely on trading government securities, acting as market makers in both the primary and secondary markets, and operating independently without taking deposits or engaging in other banking activities.

They must keep their trading window open throughout each business day to facilitate price discovery.

They must maintain at least 15 percent of purchased securities from each auction under the held-for-trading category for three months or until those are sold, whichever occurs earlier, or as otherwise specified by the BB from time to time.

A held-for-trading category refers to a classification of financial assets, typically debt or equity investments, that are acquired to be primarily sold in the near term, usually within a year, to generate profit from short-term price fluctuations.

The primary dealers must acquire and maintain a quarterly average of 30 percent or higher of their total holding of government securities under the held-for-trading portfolio for market making.

The bidding obligation for primary dealers has been divided into two segments.

A total of 60 percent of the bidding obligation shall be calculated based on the total demand and time liabilities of the respective primary dealers.

The remaining 40 percent shall be equally distributed among all primary dealers or as specified by the auction committee from time to time.