Debt market: SBP selects primary dealers for new fiscal year

Eleven dealers will be eligible to bid for T-bills, investment bonds.

KARACHI: The State Bank of Pakistan (SBP) has selected 11 banking institutions as primary dealers for market treasury bills and Pakistan Investment Bonds for 2014-15.

The central bank invites applications from banks, development finance institutions (DFIs), investment banks and listed brokerage houses for the appointment of primary dealers for Pakistan’s debt market every year.

The selected banks are NIB Bank, Habib Bank, National Bank, JS Bank, Standard Chartered Bank Pakistan, United Bank, Pak Oman Investment Company, Faysal Bank, MCB Bank, Citibank and Bank Alfalah.

The central bank requires that all institutions applying for the primary dealership must meet the minimum paid-up capital requirement as at the end of the last financial year.

The same 11 institutions were primary dealers during the outgoing fiscal year, SBP records show.

Primary dealers are supposed to participate in the trading of government papers in the primary market by bidding in auctions of government securities conducted by the SBP from time to time.

They are also required to distribute government securities to banks that are not primary dealers and other retail/institutional clients besides playing the central role in the development of secondary market to enhance its liquidity and turnover.

Most importantly, the 11 institutions act as ‘market-makers’ in government securities’ trading by quoting two-way prices in the market. As market-makers, the institutions ensure that government securities remain liquid in the market and are always ready to be sold or purchased.

Also, primary dealers provide custody services to their customers that have investors’ portfolio of securities accounts for government papers’ holding, collection and payment of profits and maturity proceeds.

The SBP announces the name of three best-performing primary dealers at the end of each fiscal year. The best-performing dealers in the outgoing year were NIB Bank, Habib Bank and National Bank.

Published in The Express Tribune, July 1^st, 2014.

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