Governor, State Bank of Pakistan, Syed Salim Raza on Monday said that Electronic Bond Trading Platform will enhance investors’ base of the sovereign debt market as it would attract investors from the non-banking sector as well resulting in higher liquidity in the government securities.
Speaking at the launching ceremony of this bond here at State Bank Headquarters, Mr. Raza said that the platform would help investors to easily access marketable securities including Market Treasury Bills, Pakistan Investment Bonds, Ijara Sukuks, diversification of investment portfolios, ensure expected better returns based on the risk adjusted return basis and achieve liquidity through the system.
SBP Governor said that the Platform was selected by a committee of members from commercial banks and SBP, and was expected to foster a brisk environment for the development of secondary market activities.
Mr. Raza said the platform would serve as a central database for all fixed income activities in the country resulting in improved price discovery and liquidity in the securities.
The availability of real time information about yields and turnover would be beneficial for all investors & corporate issuers, facilitating them a benchmark on their upcoming corporate bonds or funding requirements and reduction in cost of borrowing due to reduced liquidity premiums and wider investor base, he added.
The governor said that the introduction of the platform was not expected to provide a fillip to fixed income markets overnight, but it would definitely in the long run pave the way forward for the development of non-bank debt markets and non-bank savings and investment instruments, which was an essential need to deepen and diversify our financial markets.
For market participants, it would provide opportunities to create and underwrite corporate debt; proprietorial interest rate trading and positioning besides, providing advisory services for hedging market interest rate risk.
He said that Electronic Bond Trading Platform would also provide international investors an additional window to access the country’s financial markets thereby bringing it on the radar of international financial markets.
“The fact that the Platform is tried and tested in global financial markets in the world is an added advantage as it will provide international investors with an additional window to access Pakistan’s financial markets and it will help put Pakistan on the trading map for globally distributed portfolios,” he said.
SBP Governor opined that since sovereign yield curve serves as the touchstone for all other borrowing in a country, the focus in the initial phases would be on the development of sovereign paper market.
The most active participants in that market were the Primary Dealers (PDs) in government securities, therefore, it had been made mandatory for them to use that platform for market making in the sovereign paper, he added.
“We have had planned discussions with non-PD banks, Asset Management Companies (AMCs), Insurance Companies and Employee Funds to be part of the system, and expect they will play a regular market role, going forward,” he said and added that initially that system would capture government securities (MTBs, PIBs and Sukuks).
Going forward this platform would be used to conduct Primary Auctions, OMOs and other instruments and work was also in progress to link that platform to SBP’s Real Time Gross Settlement (RTGS) payment system to create a straight-through processing environment, Mr. Raza said.
Executive Director Mr Asad Qureshi, Director Financial Markets Strategy and Conduct Department Mr Ali Sultan and Director Domestic Markets & Monetary Management Department Muhammad Ali Malik of State Bank of Pakistan also spoke on the occasion.
Primary reason for introducing an Electronic Trading Platform in the fixed income market is to enhance efficiency. Presently, there is lack of real-time information source for fixed income instruments in the country of the price and volume trends in the OTC market. The platform that has been launched by SBP is not just a trading platform; it will also serve as a central database for all fixed income activity in the country resulting in much improved pre-trade price discovery. Any deals that take place on the system will be disseminated in real-time resulting in a representative sovereign yield curve which is the prerequisite for the development of other debt market segments.
SBP would also source and disseminate information from this platform pertaining to Fixed Income Market activity vis-à-vis traded prices and volumes on its website at each end-of-day for wider investor awareness and facilitate in their investment decisions. The launching ceremony was attended, among others, by heads and representatives of commercial banks besides senior officials of the State Bank.
