Jan 18 - 24, 20

Cumulative daily trading volume of the government securities through Electronic Bond Trading Platform (EBND) reached an impressive figure of Rs 27 billion since its launch on January 11, 2010.

The trading volume in government securities comes to Rs.0.26 billion on Saturday last while the cumulative volumes since start of the month have reached Rs. 65.2 billion as reported by the State Bank of Pakistan.

This platform, which has been launched by Governor SBP, Syed Salim Raza, is expected to gradually develop secondary debt securities market in the country.

It may be mentioned here that the State bank has started disseminating details of trading conducted on the Platform in the secondary market on SBP's Website on Economic Data page for awareness of the investors.

Two reports that have been introduced are available on SBP Website on daily basis by the close-of-day encompassing day's trading activity and month-to-date trends for information of investors and issuers alike on price, volume and trends.

Projecting the future outlook of the forthcoming secondary market for government securities, Syed Salim Raza has said that Electronic Bond Trading Platform will enhance investor's base of the sovereign debt market as it will attract investors from the non-banking sector as well, resulting in higher liquidity in the government securities.

The Platform will 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.

Talking to Page, Zafar M. Shaikh, Director General of National Savings said that during 2009-10 the directorate is chasing a target of Rs241 billion investment through old and new bond scheme of which over Rs100 billion was already achieved by end December 2009. He was confident that efforts were made to create awareness at the grass root level especially to attract small and middle income group savers.

SBP said that the Platform was selected by a committee of members from commercial banks and SBP, and is expected to foster a brisk environment for the development of secondary market activities.

This Platform will 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 will be beneficial for all investors & corporate issuers, facilitating them to benchmark on their upcoming corporate bonds or funding requirements and reduction in cost of borrowing due to reduced liquidity premiums and wider investor base.

'The introduction of this Platform is not expected to provide a boost to fixed income markets overnight, but it would definitely pave the way forward for the development of non-bank debt markets and non-bank savings and investment instruments an essential need if we are to deepen and diversify our financial markets,' he said and added that for market participants, it will provide opportunities to create and underwrite corporate debt, proprietorial interest rate trading and positioning besides, provide advisory services for hedging market interest rate risk.

Electronic Bond Trading Platform will 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 this 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, the chief of the central bank said.

Since sovereign yield curve serves as the benchmark for all other borrowing in a country, the focus in the initial phases will be on the development of sovereign paper market. The most active participants in this market are the Primary Dealers (PDs) in government securities, therefore, it has been made mandatory for them to use this Platform for market making in the sovereign paper.

"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," he said and added that initially this system will capture government securities (MTBs, PIBs and Sukuks).

This platform would be used to conduct primary auctions, OMOs and other instruments and work is also in progress to link this platform to SBP's Real Time Gross Settlement (RTGS) payment system to create a straight-through processing environment.

It may be mentioned here that the 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. Additionally, SBP would also source and disseminate information from this platform pertaining to fixed income market activity vis-a-vis traded prices & volumes on its website at each end-of-day for wider investor awareness and facilitate in their investment decisions.