Brokers' apathy still keeps T-bonds inaccessible for retail investors

General investors are yet to get access to primary auctions of T-bonds though the securities regulator laid down the process for stock brokers to participate in them on behalf of their clients.
The guidelines were issued about one and a half months back to make the risk-free fixed-income securities available for retail investors, but stock brokers that are meant to play the key role as intermediaries in here have shown no interest.
The Bangladesh Bank conducts auctions of Treasury bonds on every Tuesday. Investors, who have sought to take part in the auctions, have failed to get cooperation of their stock brokers.
Talking to The FE, some stock brokers claimed that the guidelines issued by the Bangladesh Securities and Exchange Commission (BSEC) were incomplete.
What they meant was that without detailed information of investors the central bank would not be able to open BPID (Business Partner Identification) accounts. The accounts will be maintained by the BB to transfer interest time to time and principal amounts upon bonds' maturity.
Investors' information should be given to the central bank by the Central Depository Bangladesh Limited (CDBL).
BB officials say information can be shared with the central bank through emails or Application Programming Interfaces (API).
The central bank will need detailed information of those investors who will be successful in purchasing the assets.
"Getting investors' information is not a problem. But investors' participation in auctions will not be possible unless stock brokers come forward and do what is needed," said Mohammad Anwar Hossain, additional director of the debt management department of the central bank.
The BB has already received information of the investors who have traded T-bonds in the secondary market, he added.
A stock broker is required to open a bank account with a member dealer (MD) bank to collect money from a client who intends to purchase T-bonds. It will then transfer the investor's funds worth at least Tk 0.1 million or its multiples into the bank account from the consolidated customers' account (CCA).
The stock broker will also open an omnibus BO (beneficiary owner's) account with the CDBL for the auction.
An MD bank will take part in the auction on behalf of the stock broker, and the funds will be transferred to the central bank.
On completion of the auction, the purchased units of T-bonds will be sent to the broker's omnibus BO account, and subsequently the units will be transferred to the client's BO account.
Since the issuance of the guidelines, not a single stock broker has taken any move to place orders in BB auctions.
A stock broker needs the board's consent before opening an omnibus BO account and an account with an MD bank.
Some interested stock brokers are still awaiting permission of their boards, said an official of LankaBangla Securities.
Some leading brokerage firms said they were still analysing the guidelines, while others said they were managing T-bonds from their parent companies for their clients.
For example, UCB Stock Brokerage's Managing Director Mohammed Rahmat Pasha said his clients could purchase T-bonds from the broker's parent company-UCB-at auction rates.
In such a case, the brokerage house gets transaction fee. "We also consider clients' satisfaction a high priority," said Mr Pasha.
The stock exchanges have been asked by the BSEC to help stock brokers get prepared for the bond auctions.
Asked about the role of the Dhaka Stock Exchange (DSE), its acting managing director M. Shaifur Rahman Mazumdar said most of the stock brokers had a lack of awareness about transactions of the fixed-income securities.
"The DSE is holding awareness programmes. It will take some time to make them willing to take part in the auctions." Once stock brokers are ready, general investors should be encouraged to invest in Treasury bonds, added Mr Mazumdar.
Officials of LankaBangla Securities said they were disseminating information to their clients.
Meanwhile, T-bonds are being traded in the secondary market via some brokerage firms.
A leading brokerage firm, UCB Stock Brokerage facilitates transactions of T-bonds worth around Tk 50 million on an average per month.
LankaBangla said it had conducted around 70 per cent of all secondary market T-bond transactions in the last one and a half months.
The company will be able to open the accounts necessary for participation in the auctions within a month, subject to the board's consent, officials said.
Since T-bonds are not so available in the secondary market, the BSEC considered giving individual investors access to the primary auctions so that secondary trading gets a boost.
To that end, Md. Saifuddin, chief executive officer of IDLC Securities, said that if a stock broker had the scope of holding T-bonds, frequent transactions would take place between clients and brokers.

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