Circulars/Notifications - Domestic Market & Monetary Management Department  
 DMMD Circular No. 12 of 2017

July 03, 2017 

The Presidents/Chief Executive Officers
All Banks/Primary Dealers

Master Circular - Open Market Operations

As part of its monetary policy implementation, State Bank of Pakistan conducts Open Market Operations to keep the money market overnight repo rate close to the SBP Target “Policy Rate” introduced under revised Interest Rate Corridor Framework announced vide DMMD Circular no. 9 dated May 23, 2015. All Schedule Banks and Primary Dealers are allowed to participate in these OMOs; however, SBP may also conduct special OMOs in which only Primary Dealers will be eligible to participate. In order to facilitate these participating institutions, instructions issued by SBP from time to time on the subject have been consolidated in the form of this master circular and are given hereunder:

  1. Eligible Securities:
    1. Government of Pakistan Market Treasury Bills, Pakistan Investment Bonds and any other security notified by SBP for this purpose.
    2. The securities classified by the eligible participants under Held to Maturity category cannot be used in OMOs.

  2. OMO Announcement and Bid Submission Mechanism:
    1. SBP will announce OMOs as and when required by the market conditions. OMO notice will be published on SBPK pages on Reuters and Bloomberg.
    2. Eligible participants can submit their bids through:
      1. Reuters Dealing system using SBP’s  primary dealing code  “SBPD” ; and/or
      2. Using format attached at Annexure-A (via Fax/electronic mode etc in case of unavailability of Reuters Dealing terminal for any reason).
        However, SBP will not accept any bid on telephone.
    3. An Eligible Participant can submit up to three bids in a single OMO tenor.
    4. In case of OMO Injection (reverse Repo), the participants will also submit realized value of underlying securities along with bid amount (face value).
    5. The minimum Bid amount will be Rs. 100 million and multiples of Rs. 50 million thereof.
    6. The participants are advised to strictly observe the cut-off time for submission of bids in the OMO. Any bid submitted after the cut-off time will not be entertained by SBP.

  3. Pricing Mechanism:
    1. OMOs will be based on multiple price competitive auction process.
    2. PKRV rates will be used to calculate 1st price of securities involved in repo based transactions (OMO Mop-up/Injection) between SBP and participants.
    3. If any Repo/Reverse Repo Contracts are maturing on public/bank holidays then such contracts will be extended to the next business day, and interest calculations will incorporate this extended period. For calculations purpose, the interest rate will remain the same for extended period as used in original contracts.

  4. Procedure for Acceptance of Bids on Pro-rata Volume Basis:
    1. SBP will have the discretion to accept bids submitted in Open Market Operations on a ‘pro-rata volume’ basis if the amount of bids submitted up to the cut-off rate in a particular tenor is more than the amount required by SBP.
    2. In case SBP decides to accept bids on a pro-rata volume basis, participants will be allocated an amount equivalent to their proportion in the total bids submitted at the given cut-off rate.
    3. Amounts allocated to the participants on pro-rata volume basis will be rounded off to the nearest Rs.  50 million (face value) subject to minimum of Rs. 100 million.
      An example to illustrate the procedure for acceptance of bids on pro-rata volume basis is provided in Annexure-B.

  5. Result Announcement:
    1. The result will be announced on SBPK pages on Reuters and Bloomberg.
    2. The SBP reserves the right to reject all or any of the bids without assigning any reason in the OMOs.

  6. Submission of OMO Contracts:
    1. The OMO contracts of successful bids will be addressed to Chief Manager, SBP-BSC Karachi Office.
    2. The contracts and allied documents will be submitted to Securities Division, SBP-BSC Karachi as per instructions issued vide their letter dated June 07, 2017 in this regard.


Yours sincerely,


(Muhammad Amin Khan Lodhi)
Head, DMMD

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