There has been a positive response to Central Bank
quote s call to expand the government securities market by issuing new licences.rn
quote s Superintendent Public Debt, Dharma Dheerasinghe told Lanka Business Online that lquote a few parties have already submitted their applications.
rnrnMarket watchers speculated that the new comers include Peoples
quote Bank, Capital Asia Markets and HSBC Bank are believed to have sent in their applications.
rnrnExisting dealers such as Commercial Bank and Bank of Ceylon plan to wind down their present dedicated operations and re-open them as a unit under the respective banks.
rnrnDheerasginhe declined to comment, but Peoples Bank Chairman Lal Nanayakkara confirmed they had sent in an application.
rnrnUnder the new regulations, commercial banks are not required to form dedicated entities. Instead, banks have to set aside Rs. 150 mn in capital to obtain a licence.
rnCritics have pointed out that “vested interests” of the current dealers – six out of eight are units of banks endash have prevented them from actively mobilising savings into government securities. The solution lies in appointing more non-bank dealers.
rnNewcomers will also be on par with existing primary dealers and have exclusive access to bid at the primary auctions.
rnrnScripless trading coming up
rnThe Central Bank also plans to implement scripless trading of government securities, to improve liquidity and efficiency by reducing the cost of intermediation. But indecision on how to structure the central depository has delayed plans. Scripless trading is now due to start next year.
rnThe Colombo Stock Exchange also plans to appoint second-tier debt dealers that will interact with primary dealers. The bourse will offer the secondary debt dealers endash which could include stock brokers, banks and insurance firms endash its system to trade, clear and settle government debt.
rnLocal transactions are now all certificate-based and payments have to be delivered to the Central Bank.
rnCritics have pointed out that the absence of a scripless system has prevented retailers from investing in gilt-edge securities and limits the market to state-run financial institutions and a few private captive funds. rn