Sri Lanka Central Bank reforms bond trading

Aug 05, 2016 (LBO) – Sri Lanka’s Central Bank will introduce several improvements to the process of trading treasury bonds and reporting of bond trades, a statement said.

In addition, a new trading platform will be rolled out, and the supervision functions will be switched from the Public Dept Department to the Department of Supervision of Non-bank Financial Institutions, the statement added.

The Central Bank, under the new governor appointed last month, said it has commenced releasing summary trading statistics on actual trading of government securities in the secondary market for the first time.

This is being done, “as a further policy measure to develop the government securities market.”

From August 1, all primary dealers have to undertake inter-primary dealer trades in the trading platform arranged by the Central Bank through Bloomberg, an international financial trading and information platform.

All primary dealers will have to report outright sales of government securities of value in excess
of 50 million rupees to investors to this platform within 30 minutes of each transaction.

“Accordingly, the Central Bank will monitor these transactions on an on-going basis and summary of trading
information consisting of yield rates and volume by each series of securities traded will be published in the Central Bank website in the format as annexed below.”

The Central Bank plans to release such information twice a day, at noon and close of the day, in due course when the reporting system is fully operative.

This information will help investors to study the current status of government securities market conditions along with other financial market and economic information and make more informed decisions in relation to their investments.

“The availability of such market information will further promote transparency, price discovery and outreach of the
government securities market in parallel to other financial markets.”

In due course, outright secondary market sales of government securities by non-primary dealer banks to their customers also will be brought into this system, the statement said.

The Central Bank has also commenced a procurement process for setting up a dedicated electronic trading platform along with Central Counterparty System which will provide market information on real time basis, in line with developed markets.

Several measures are being put in place to strengthen the regulation and supervision of the market in line with international standards, the Central Bank added.

The regulation and supervision of the government securities market has been assigned to the Department of Supervision of Non-bank Financial Institutions and the Public Debt Department will undertake functions relating to issuance, registry, market development and debt management.

“These policy initiatives are expected to promote fair market practices and yield benefits of the government securities market to all participants.”

The reported transactions and resulting yield curve is below:

Government Securities Trade Summary 03 08 2016 Final