DMMD Circular No. 06 of 2018 |
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The Presidents/Chief Executive
Officers
All Banks/Primary Dealers
Master Circular on Auction of
Government Securities
(Market Treasury Bills and Pakistan
Investment Bonds)
State Bank of Pakistan (SBP) conducts auction
of Government Securities (Market Treasury
Bills (MTBs) and Pakistan Investment Bonds
(PIBs)) as per instructions issued by SBP
from time to time. In order to facilitate
Banks/Primary Dealers and bring more clarity,
these instructions are being consolidated
in the form of a master circular as given
below:
A. Eligibility:
Only designated Primary Dealers (PDs) will
be eligible to participate in the competitive
auctions and to submit Non-Competitive Bids
(NCBs) for MTBs and PIBs.
B. Auction Systems and Back-up
Arrangements:
1. |
Auctions of MTBs and
PIBs will be conducted through Bloomberg
auction module. All participants must
keep high speed internet connection
for Bloomberg terminal. |
2. |
PDs are required to keep a backup
internet connection in case the primary
internet connection is not available
for Bloomberg services due to technical
or any other reason. |
3. |
In case backup internet also fails,
PD will approach SBP, before close
of stipulated time, to submit bids
manually as per following procedure: |
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a. |
For
competitive auction sealed bid
letters must be submitted at DMMD
counter along with an authority
letter, requesting SBP to incorporate
bids in the competitive auction.
Format for manual submission of
competitive bids for MTBs and
PIBs are attached as Annexure-A
& Annexure-B
respectively.
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b. |
NCBs
for MTBs and PIBs must be submitted
at DMMD counter or via Fax/Electronic
mode etc as per formats attached
as Annexure-C
& Annexure-D
respectively. |
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4. |
If there
is a city/country wide internet connectivity
issue, SBP at its discretion may cancel
online submission of bids and require
PDs to submit bids manually as per procedure
explained in point B-3 above. In this
regard, all PDs will be informed accordingly.
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C. Auction Announcement and Bids
Submission:
1. |
The auction calendar of MTBs and PIBs
will be updated on SBP website on monthly
basis which will include Auction schedule,
target amounts, for the next three months. |
2. |
Auctions of MTBs and PIBs will be conducted
under Bloomberg ticker AUPD. |
3. |
SBP will setup the Auction page on AUPD
for both the Competitive Auction and the
Non Competitive Auction, which will include
all the relevant details. |
4. |
PDs will
be required to submit bids through online
auction system during the stipulated
time period. No change in bids will
be allowed after the closure of bidding
time. |
5. |
The bid size
(both the competitive auction and non-competitive
auction) will be as under: |
Government
Security |
Bid
Size |
MTBs |
Minimum of Rs.
5,000 and in multiples thereof |
PIBs |
Minimum of Rs.
100,000 and in multiples thereof |
D. Participation in Competitive
Auction:
1. |
PDs will submit competitive bids, for
both MTBs and PIBs, in terms of price (up
to four decimal points). However, the bid
price for long-term paper would be confined
to a range of + 50 basis points from the
respective tenor prices appearing on Reuters
PKRV page on the last working day prior
to bidding. |
2. |
PDs will be free to place multiple bids. |
3. |
Bid report of auction will be available
on SBP website. |
4. |
Bids may be accepted either in full or
on pro-rata volume basis. Procedure for
acceptance of Competitive Bids on Pro-rata
Volume Basis is as under: |
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a. |
If the amount of bids submitted up to
the cut-off price, in a particular tenor,
is more than the required amount; an amount
lower than the total amount offered at the
cut-off price can be accepted. |
b. |
In case it is decided to accept bids
on a pro-rata volume basis, PDs will be
allocated an amount equivalent to their
proportion in the total bids submitted at
the given cut-off price. |
c. |
Amounts allocated to PDs on pro-rata
volume basis will be rounded off to the
nearest Rs. 50 million (face value). |
d. |
The pro-rata rule will not be applicable
on any bid equal to or less than Rs. 50
million (face value). In such an instance,
PD will be allocated 100% of the bid amount. |
e. |
An example to illustrate the procedure
for acceptance of bids on pro-rata volume
basis is provided in Annexure-E. |
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E. Participation in Auction through
Non Competitive Bidding:
1. |
PDs will submit NCBs one day prior to
the competitive auction day during the stipulated
time period. |
2. |
PDs will
be allowed to submit NCBs for investors
other than banks (scheduled, specialized
and microfinance)/ DFIs/ Investment
Banks. |
3. |
PDs will submit NCBs with the name of
investor (in Block Letters) and amount of
investment without quoting price. |
4. |
Investors
will be allowed to submit one bid in
a single tenor, in case of submission
of multiple bids in one tenor by single
investor, all such bids would be treated
as void. Further, the ceiling for one
investor in a single tenor will be linked
with pre-auction target i.e. 0.25% of
the auction target subject to minimum
of Rs. 25 million and maximum of Rs.
500 million. |
5. |
The NCBs
will be accepted at weighted average
yield in each tenor as decided in the
primary auction. The price of NCBs accepted
at weighted average yield will be rounded
off to four decimal places. |
6. |
The PDs will not be required to submit
any document to SBP at the time of submitting
NCBs. However, PDs shall maintain record
of client’s requests that may be checked
by SBP as and when required or during on-site
inspection. |
7. |
NCBs may be accepted either in full or
partially (in order of lowest to highest
amount and/or on pro-rata basis). |
8. |
Any NCB not complying with the above
instructions will be rejected without any
prior notice. |
F. Result Announcement:
1. |
The
result for both competitive and non-competitive
auctions will be announced on SBPK pages
on Reuters and Bloomberg. |
2. |
Auction result will also be updated on
SBP website. |
Above instructions will supersede all previous
instructions issued on the subject matter.
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Yours sincerely,
Sd/-
(Muhammad Amin Khan Lodhi)
Director, DMMD
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