Gov’t to name 10 market makers under GSED program

MANILA, Philippines — The government is set to name 10 “market makers” under the Enhanced Government Securities Eligible Dealers (GSED) program before the end of the month, the Bureau of the Treasury (BTr) said.

In an interview, National Treasurer Rosalia de Leon said the Treasury would announce on Nov. 27 the 10 GSED which will play the role of market makers in the domestic government securities (GS) market.

“Yes (we have finalized the list). We’re looking at 10 (market makers),” De Leon said.

Under the enhanced GSED program, traders who have shown capacity and commitment to support the development of the GS market will be evaluated by the Treasury and selected as market makers.

To be chosen, GSEDs should have good standing with primary regulators, have P100 million unimpaired capital and qualify for other criteria set by the Treasury, such as volume of trade, auction participation, and bid efficiency, among others.

As market makers, the 10 would have privileges and obligations, De Leon said.

The Treasury said they would be allowed participation in second round auctions, allowed participation in market consultations conducted by the BTr, and be given due consideration on participation in special issues and liability management activities of the BTr.

They would also be obligated to submit at least one competitive bid during each scheduled auction, support capital market initiatives, sign the Global Master Repurchase Agreement for dealing in repurchase (repo) transactions, and quote effective two-way prices.

The BTr is targeting to launch the market maker system on January next year.

According to the Treasury, the enhanced GSED program aims to improve the performance of the primary debt market and increase liquidity of the secondary market.

Meanwhile, De Leon said the inaugural trade for the repo facility would be conducted the same time as the announcement of market makers.

A repo or repurchase agreement allows dealers to sell government securities to investors on a short-term basis.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. earlier said the development of a repo market is part of the initiatives to be undertaken by the government to strengthen the domestic debt market.