Regulator revises T-bonds' auction process

The process to participate in the auctions of Treasury bonds has been made more complicated, according to brokers, by the new securities commission for retail investors.
The Bangladesh Securities and Exchange Commission (BSEC) on Wednesday issued a directive bringing some changes to the auction process.
The central bank holds a primary auction of Treasury bonds every Tuesday.
As per the existing system, stock brokers collect bid amounts from clients by Sundays and transfer the money to the account of PD (primary dealer) banks within Monday.
The revised BSEC directive said clients would have to inform their stock brokers about their intention to participate in the auction by 12:00noon every Thursday.
The stock broker is required to send the information to the Central Depository Bangladesh Limited (CDBL) by 3:00pm the same day. Then the CDBL must send the information to the central bank by the end of the day.
On receiving the information, the central bank will create BPID (business partner identification number) for new investors within Sunday, and a list of eligible participants, including old ones, will be sent by the BB to the CDBL on Sunday.
The CDBL is required to send the list of eligible investors to the stock brokers the same day (Sunday). The stock brokers will then ask clients to deposit bid amounts into the CCA (consolidated customer's accounts) by Sunday.
Stockbrokers fear that the exchange of information between different parties will not be as quick as expected.
If the CDBL sends the list to stockbrokers, say, at around 4:00pm or later on a Sunday, it will not be possible for a client to deposit money into the CCA the very day.
If the client deposits money into the CCA on Monday, it may not be possible to transfer the amount into the account of PD bank by the end of that day.
However, clients have an option of depositing cash into the PD bank account directly on Monday to participate in the auctions. In that case, brokers will face the challenge of identifying successful bidders, and they are required to maintain a time-consuming separate system for those clients, which, according to Md Ashequr Rahman, managing director of Medway Securities, will involve additional cost.
Speaking about the factors that provoked the changes, Md. Lutful Kabir, an additional director of the securities regulator, said the central bank on several occasions had to delay transferring securities to many investors' accounts due to incomplete information submitted before the auctions.
The stock brokers had been requested to solve the problems but in vain.
The changes have been brought in line with the suggestions made by the central bank to ensure availability of information before the auctions.
However, the chairman of EDGE Asset Management said that though investors would be able to deposit money directly into the accounts of PD banks that would entail unnecessary hassles for brokers and investors.
SM Galibur Rahman, head of research & strategic planning of Shanta Securities, said the revised directive would make it difficult to collect bid amounts from clients within the timeframe.
"Theoretically, everything is possible," said Managing Director of CDBL Md. Abdul Mutaleb. The CDBL should be able to communicate with the central bank and stock brokers at the right time. But the problem will arise if there is any delay on either or both sides.
"The difficulties, if any, will be visible after the beginning of the new process," Mutaleb said.

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