Extension of electronic bond system to include repos will deepen
Sri Lanka’s government
Bloomberg and the Central Bank of Sri Lanka (CBSL) today announced the introduction of repurchase transactions (repos) of Sri Lankan government securities on the Bloomberg E-Bond trading and market surveillance system.
Over 20 commercial banks and primary dealers will now be able to trade in repos on Bloomberg’s E-Bond system, a workflow solution launched last September as the execution platform for fixed income secondary trading in Sri Lanka.
“Fiscal consolidation is a top priority for Sri Lanka. We have seen a major overhaul in the government securities market, with the introduction of a fully-competitive auction system in 2015,” said Finance Minister Ravi Karunanayake.
“Measures we have initiated towards active debt management have resulted in better price discovery, market liquidity and transparency. In line with these initiatives, Bloomberg’s E-Bond trading system for government securities in the secondary market will help deepen Sri Lanka’s fixed income market and further its development.”
Sri Lanka joins the ranks of central banks in Singapore, Indonesia and Philippines whose government securities are available on global e-trading platforms. This is part of CBSL’s strategic plan to further develop its government securities market as a key contributor to the Sri Lankan capital market and economy and increase local and foreign investor participation.
“Adding the repo market to the Bloomberg E-Bond trading and market surveillance system marks another important milestone in deepening the fixed income market and increasing its transparency. This will serve to boost public confidence and enhance the savings pool available for investors in government securities,” said Central Bank Governor Dr. Indrajit Coomaraswamy.
“In Sri Lanka, the repo market is dominant in government securities. Since the launch of Bloomberg’s E-Bond trading system in September 2016, we have witnessed higher trading volumes and liquidity in the secondary market, leading to growing investor confidence,” said Deputy Governor P. Samarasiri, supervising the financial sector regulation and supervision cluster of the Central Bank of Sri Lanka. “Extending the e-trading platform to include the repo market is a significant development as it will further boost liquidity and also reduce the cost of borrowing.”
“Over the last year, we have been working with the Sri Lanka Central Bank to bring market participants onto Bloomberg’s E-Bond trading platform and are delighted that they see great value in extending this to repo transactions. As investor interest in Sri Lanka rises, we will continue to bring global best practices and technology to support the future growth of its capital markets,” said Sunny Chhabria, Bloomberg’s Head of South Asia.
CB further improves transparency in government securities market
The Central Bank said yesterday it has taken a key measure to further improve transparency in the government securities market.
The Central Bank on 26 April 2017 mandated primary dealers and licensed banks to use the Bloomberg electronic bond trading platform to trade repurchase transactions (repos) in government securities.
Accordingly, they are required to:
a) Quote and trade repos between them in the trading platform
b) Report in the trading platform repos carried out over the counter with investors, each of Rs. 100 million or above within 30 minutes of the completion of each repo transaction.
Accordingly, the system testing and monitoring have now been completed. The Central Bank will release the daily summary trade information of repo volumes and yield rates based on standardised tenures such as overnight, one week and two weeks shortly for the information of market participants.
This is the third stage of the Bloomberg trading platform designed for the trade of government securities in Sri Lanka. This trading platform first commenced on 1 August 2016 for outright trade of government securities of Rs. 50 million or above carried out through primary dealers, which was extended to licensed banks with effect from 15 September 2016.
Accordingly, such outright trades reported up to 31 March 2017 amount to Rs. 1,128 billion of 6,763 transactions. The Central Bank releases summary trade statistics daily to the public.
Other major policy measures in the process to further increase transparency and market development are:
a) Commencement of Cabinet-approved procurement process to establish a secondary market electronic trading platform inclusive of a new Central Counter-party and Clearing and Settlement System.
b) Approval of the Monetary Board to launch a new monthly public auction system for Treasury bonds with the underwriting facility.
c) Overhaul of regulatory and supervisory system with rules and principles to promote market discipline.
“Accordingly, the transparency brought to the market will improve the price discovery and increase the market liquidity and outreach which will reduce the cost of borrowing in the medium term,” the Central Bank said.