Government securities trading reforms begins second quarter

Government will from the second quarter effect a number of changes regarding how its securities are traded on the capital market.

According to the Ministry of Finance in its 2021-2024 Medium-Term Debt Management Strategy (MTDS), the changes to be implemented include the new Primary Dealer guidelines that replaces the Joint Book Runners (JBRs) with a Bond Market Specialist (BMS) group under much stricter rules, requirements, and obligations with regards to marketing, selling, distributing, and trading of government bonds.

The BMSs are institutions authorised by the Ministry of Finance and the Bank of Ghana to participate in the book-building auction of government notes and bonds.

The book-building method is intended to diversify the existing resident and non-resident investor base, seeking out new investors and extending the geographical reach of government in raising funds.

According to the new primary dealer guidelines, bond market specialists have been appointed from among primary dealers and licensed investment dealers to conduct government’s bond market operations.

The BMSs are expected to achieve and maintain a market presence sufficient to earn them an appropriate share of secondary market turnover. Further to this, the BMSs are expected to maintain a minimum secondary market share of not less than five percent, as measured on a six-month rolling average.

According to the Ministry, the reforms will help resolve current inconsistencies between Primary Dealer rights and obligations and incentivise PDs who want to put more effort into domestic market development.

These are in line with broader efforts to develop a well-structured and well-functioning money market, which will effectively help improve the efficiency and transparency of the Ghana Fixed Income Market (GFIM).