Primary dealers to get underwriting commission

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Siddique Islam
The government will provide underwriting commission to the primary dealers (PDs) through the Bangladesh Bank (BB) to activate the country's secondary bond market.
The PDs have submitted a proposal mentioning different slabs to the authorities concerned for fixation of underwriting commission, official sources said.
The proposal was submitted at a meeting with the officials of the BB and ministry of finance, held at the central bank Monday with the Executive Director Yasin Ali in the chair.
The central bank earlier amended the guidelines for the PDs offering commission and liquidity support to activate the bonds market.
"PDs will be paid underwriting commission at a rate as may be determined by the government from time to time," the central bank said in its amended guidelines, issued recently.
Under the amended guidelines, each of the bank and non-bank PDs will underwrite a minimum of 12 per cent and 4.0 per cent of the auction amount respectively for fiscal 2007-08 until further notice.
"We will submit our recommendations to the ministry of finance about fixation of the rates of underwriting commission for the PDs after scrutinising the proposal," a BB senior official told the FE Monday.
He also said the commission will be paid by the government while the central bank will act as an operator.
During the meeting, the PDs called for taking necessary measures to allow them and none else for submitting bids on behalf of clients.
"Non PD banks and non-banking financial institutions (NBFIs) should not allow to submit bids in the primary auctions for the government approved securities on behalf of their clients," a PD told the FE.
The meeting also discussed about the normal liquidity support, which will be provide by the central bank, for strengthening the function of the PDs.