BOG to review entry requirements of Primary Dealers

Accra, Oct. 9, GNA - Bank of Ghana is to review the qualifying standards for primary dealers in the bonds market as a first step to promoting credible secondary trading in government's issued securities. Mr Francis Andoh, Head, Treasury Department of BOG, said the review had become necessary because of the inactive participation of some of the primary dealers in secondary trading activities.

"We are in the process of changing our requirements of selection to allow for Primary dealers that can influence the direction of our markets," he said at a day's workshop on the development of the secondary bond trading market in Ghana.

Government in October last year listed its two-year Fixed Rate Note and the three-year Fixed Rate Bond, on the Exchange to promote secondary trading and to deepen the capital market.

Besides, secondary trading would also support a market driven yield curve that would provide benchmark for private sector borrowers, such as issuers of corporate bonds.

It would also allow market participants to develop the necessary skills in the trading of bond instruments to further deepen the capital market.

Hitherto, Government instruments could only be obtained through a primary dealer, who had to submit a bid on behalf of the investor at the weekly primary auction of Government securities.

However, Mr Andoh said nearly one year after listing the bonds on the Exchange, secondary trading was rather on the low side despite the congenial environment and relevant infrastructure to allow trading. He attributed the slow activity to the inadequate capital base of the primary dealers and lack of education on the part of market participants.

Mr. Rajat Kumar, Regional Head, Fixed Income Trading Standard Chartered Bank, in charge of India, Africa, Middle East, Pakistan and Sri Lanka, who was the facilitator at the workshop said active trading in the bonds market allow players to switch from one instrument to another.

He said a vibrant primary dealer system coupled with liquidity in the secondary market was a key prerequisite for developing a successful government bond market.

Mr Kumar said despite electronic trading platforms mostly in use now, the role of brokers in the success of bond market operations should not be wished away.

He stressed the importance of information flow, which was critical for investors to actively participate in the market. Other issues discussed are over the counter trading, capital availability and charges relating to transactions on the Exchange as well as withholding tax.

Mr. Ekow Afedzie, General Manager, Ghana Stock Exchange, said information dissemination was a key to attracting investors to participate in trading in the bonds.

He said the Stock Exchange would look at how to reduce the charges to encourage secondary trading.