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:

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:
	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. 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.
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.

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:
	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.

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.