PRIMARY DEALERS IN GOVERNMENT SECURITIES. REF: FRTMD CIRCULAR LETTER NO. 06 DATED 29.07.2003.

বাংলাদেশ সরকারের ট্রেজারী বিল ও বন্ডের ইস্যু পরবর্তী ক্রয় বিক্রয়ের সেকেন্ডারী মার্কেট সক্রিয়করনের লক্ষ্যে আগ্রহী ও যোগ্য ব্যাংক ও আর্থিক প্রতিষ্ঠানদের মধ্য থেকে প্রাইমারী ডিলার নিয়োগের সিদ্ধান্ত নেয়া হয়েছে। প্রাইমারী ডিলারের ভূমিকায় নিয়োগলাভের যোগ্যতা, দায় দায়িত্ব, কার্যপদ্ধতি ও অন্যান্য প্রাসঙ্গিক বিধিবিধান সম্বলিত গাইডলাইন্স এতদসংগে প্রদত্ত হলো (সংযোজনী-১)।

২। প্রাইমারী ডিলার হিসাবে নিয়োগলাভে আগ্রহী তফসিলী ব্যাংক এবং CRR পরিপালনের প্রয়োজনে বাংলাদেশ ব্যাংকের সংগে চলতি হিসাব পরিচালনকারী আর্থিক প্রতিষ্ঠানগুলোকে সংযোজনী – ২ এ প্রদত্ত ছকে আবেদনপত্র আগামী ২১-০৮-২০০৩ তারিখের মধ্যে মহাব্যবস্থাপক, ফরেক্স রিজার্ভ অ্যান্ড ট্রেজারী ম্যানেজমেন্ট ডিপার্টমেন্ট, বাংলাদেশ ব্যাংক, প্রধান কার্যালয়, ঢাকা বরাবরে দাখিলের পরামর্শ দেয়া যাচ্ছে। প্রাপ্ত আবেদনপত্র গুলোর মধ্য থেকে প্রাইমারী ডিলারের ভূমিকায় নিয়োগের জন্য মনোনীত ব্যাংক বা আর্থিক প্রতিষ্ঠানকে সংযোজনী -৩ এ প্রদত্ত ছকে অঙ্গীকারনামা দাখিল করতে হবে।

অনুগ্রহপূর্বক প্রাপ্তি স্বীকার করবেন।

সংযোজনঃ বর্ণনা মোতাবেক।

(সংযোজনী-১)

Guidelines for enlistment and operations of Primary Dealers in Government securities

 With a view to activating a secondary market in Treasury bills and other Government securities, it has been decided to introduce the following guidelines for enlistment and operations of Primary Dealers (PDs) with roles in subscribing and underwriting primary issues and in market making for secondary trading deals with firm two-way price quotes.

  1. Objectives
  2. To enhance liquidity and depth in the securities market by facilitating price discovery and turnover, encouraging voluntary holding of government securities amongst a wide investor base;
  3. To develop underwriting and market making capabilities for government securities amongst the market participants;
  4. To facilitate efficient liquidity management, and open market operations of monetary policy management.
  5. Eligibility for Primary Dealership

The Bangladesh Bank (BB) shall select PDs from amongst the scheduled banks and licensed financial institutions with current accounts with the BB for fulfillment of Cash Reserve Requirement. In selecting PDs from amongst the intending applicants and in allotting to them specified minimum subscription and underwriting responsibilities, the BB shall take into account their

  1. i) physical infrastructure in terms of number and geographical coverage of offices/branches for securities dealings, the extent of use of computers and information technology in settlement, record keeping and analysis of day to day transactions, skill and capabilities of the manpower for efficient participation in primary issues and secondary trading, and for advising and educating the investing public about investment in Government securities;
  2. ii) internal control system for fair conduct of business, settlement of trade and maintenance of accounts in securities transactions, risk management capabilities and arrangements;

iii) the level of past engagement in primary auctions and secondary trading transactions in Treasury bills and other Government securities, on own account and on account of customers;

  1. iv) solvency and overall standard of the applicant’s compliance with the prudential and regulatory guidelines of the BB and other relevant regulatory agencies.
  2. Roles and responsibilities of a PD
  3. i) A PD shall regularly and actively participate in all primary auctions and issues of Treasury bills and tradable securities, with bidding commitment for a minimum specified percentage of the primary issues of Treasury bills and underwriting commitment for a minimum specified percentage of primary issues of dated Government securities over a year. These minimum bidding and underwriting requirements will be allotted by the BB in a manner ensuring off-take of the entire intended volumes of issues. The PDs will be required to maintain success ratios (successful bids: allotted targets) of 40 percent or higher in bids over a year. A PD shall, if asked for by the BB, subscribe in any issue over and above its successful bid but within its minimum bidding or underwriting commitment, at the weighted average yield of the accepted bids for auctioned issues, and at par in case of fixed par issues.
  4. ii) A PD shall, within the first year of operation as PD, acquire a sizeable portfolio of Treasury bills and Government securities substantially in excess of its own SLR. The PD shall actively engage in secondary trading, quoting firm two-way prices and keeping its trading window open throughout each business day. An annual turnover (total purchases and sales, inclusive of redemptions at maturity) not less than ten times the average of month-end stocks of Treasury bills and Government securities over the year shall be attained and maintained.
  5. Regulations for operations as PD

Apart from the general regulatory instructions and prudential guidelines for scheduled banks and licensed financial institutions as applicable, a PD shall be subject to the following regulations in its operations as a dealer in Treasury bills and Government securities:

  1. i) A PD shall not act as inter bank or inter dealer broker.
  2. ii) A PD shall 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.

iii) For bids in primary issues on behalf of customers, a PD shall, if so desired by a customer, quote the price indicated by the customer. Purchases against bids on behalf of customers would immediately be credited in the SGL accounts of the customers concerned.

  1. iv) Transfers arising from secondary trading deals shall be booked through the SGL accounts maintained in the PD’s own books; and also in the PD’s SGL account with the BB, submitting transfer applications as per procedure to be prescribed by the BB.
  2. v) Prices would be quoted by a PD in terms of face value units of Taka 100. A two-way price quote of Taka 101.00/101.50 would indicate premium of Taka 1.00 and Taka 1.50 for bid and offer, while a quote of Taka 98.50/99.00 would indicate discount of Taka 1.50 and Taka 1.00 on bid and offer. The bid and offer prices may differ for deals of differing sizes, but in no case should the bid-offer spread be more than taka 0.50.
  3. vi) The secondary trading deals of a PD would be on spot value basis, considered as T+2 local working days.

vii) A PD shall not short-sell any particular issue and shall not carry a short position in secondary dealings.

viii) A PD shall furnish to the BB daily returns on dealing prices, positions and transactions on own account and on account of customers. A PD shall also furnish to the BB such other returns and reports in such forms and at such intervals as may be prescribed from time to time by the BB.

  1. ix) The BB shall reserve the right to inspect the books and records of all transactions and dealings of a PD;
  2. x) A PD shall immediately bring to the notice of the BB any major complaint against it by a customer, and any action initiated or taken against it by any regulatory entity including the SEC, the Registrar of Joint Stock Companies, the Income Tax authorities, the Stock Exchanges.
  3. Privileges of a PD
  4. i) A PD shall have the credential of a sub-depository of Treasury bills and Government securities, for custodial services to its customers.
  5. ii) Between bids at the same yield/price for an issue in a primary auction, the bid of a PD will rank higher in priority for acceptance than those of other bidders.

iii) A PD shall be eligible for liquidity support from the BB for its operations, collateralized by Treasury bills and Government securities from its own positions, through the repo mechanism or such other arrangements as the BB may prescribe from time to time.

  1. iv) A PD shall be entitled to underwriting commission on the issues of dated government securities underwritten by it, at rates to be prescribed by the Government from time to time (non-fulfillment of the minimum underwriting commitment will in turn attract penalties at rates to be prescribed from time to time).

Source: https://www.bb.org.bd/mediaroom/circulars/frtmd/jul2903frtmd06.pdf

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