CARIBBEAN REGIONAL TECHNICAL ASSISTANCE CENTRE (CARTAC)  Workshop on Debt Management Policies ST. GEORGE’S, GRENADA 22  – ...
DEVELOPING A GOVERNMENT SECURITIES MARKET    Current Practices & Key Challenges - The Case of  Jamaica  – Presented by  Ia...
Contents <ul><li>Snapshot of Jamaica – Map & Indicators </li></ul><ul><li>Platform for a Sound Govt. Securities Market </l...
Snapshot of Jamaica   by   Location
Platform for a Sound Government Securities Market <ul><li>Monetary Policy Implementation </li></ul><ul><li>Bank of Jamaica...
Role of the Securities Dealer  <ul><li>T he  main functions of the securities dealer system in Jamaica include strengtheni...
Basis for Promoting an Efficient Securities Market (Current Practice) <ul><li>  Adoption of a Market-based Mechanism for S...
Standards for Retaining Primary Dealer Designation - BoJ <ul><li>Maintaining the license issued by the Financial Services ...
:   <ul><li>Secondary trades (outright purchase or sale)   –   volumes, prices/yields, counter   party, purchase or sale. ...
Regulatory Framework   The Regulatory Framework for the efficient functioning of the Securities Dealer Market in Jamaica i...
Regulatory Framework  Cont’d <ul><li>Jamaica Securities Dealers Association </li></ul><ul><li>The Jamaica Securities Deale...
Reasons for Issuance Domestic Debt   The Government’s borrowing requirements for each financial year are determined by the...
Type of Instruments Currently in Issue The Government currently employs a variety of debt instruments to satisfy its borro...
Stock of Outstanding Domestic Debt (by Loan Type) (Sept 2006)
Holders of GoJ LRS and Investment Debentures/Bonds (August 2006)
Holders of GoJ US$ Bonds and Notes (A ugust 2006)
Stock of Outstanding External Debt (by Creditor Category) (Aug 2006)
Bank of Jamaica Open Market Operations (Outstanding COSH’s J$Mn)
Challenges to an Efficient and Effective Securities Market <ul><li>Potential for Oligopoly </li></ul><ul><li>Possibility o...
List of Designated BOJ Primary Dealers (15) Alliance Investment Management Limited  Barita Investments Limited  Capital & ...
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Developing a Government Securities Market - The Case of Jamaica

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Developing a Government Securities Market - The Case of Jamaica

  1. 1. CARIBBEAN REGIONAL TECHNICAL ASSISTANCE CENTRE (CARTAC) Workshop on Debt Management Policies ST. GEORGE’S, GRENADA 22 – 24 NOVEMBER , 2006
  2. 2. DEVELOPING A GOVERNMENT SECURITIES MARKET Current Practices & Key Challenges - The Case of Jamaica – Presented by Ian M. Scarlett
  3. 3. Contents <ul><li>Snapshot of Jamaica – Map & Indicators </li></ul><ul><li>Platform for a Sound Govt. Securities Market </li></ul><ul><li>Role of the Securities Dealership & Current Practice </li></ul><ul><li>Standards for Retaining Primary Dealer Designation </li></ul><ul><li>Reporting Requirements for PD’s in Jamaica </li></ul><ul><li>Regulatory Framework </li></ul><ul><li>Reasons for Issuance of Domestic Debt & Types of Issue </li></ul><ul><li>Stock of Debt & BoJ Open Market Operations </li></ul><ul><li>Primary Holders of GoJ Securities </li></ul><ul><li>Challenges to an Efficient & Effective Sec. Market </li></ul>
  4. 4. Snapshot of Jamaica by Location
  5. 5. Platform for a Sound Government Securities Market <ul><li>Monetary Policy Implementation </li></ul><ul><li>Bank of Jamaica Open Market Operations </li></ul><ul><li>Fiscal Policy Implementation </li></ul><ul><li>Domestic Borrowing </li></ul><ul><li>External Borrowing </li></ul><ul><li>Other Considerations </li></ul><ul><li>Encouraging Investment, Trade and Savings in the Secondary Market </li></ul><ul><li>Equities Market through the Jamaica Stock Exchange </li></ul>
  6. 6. Role of the Securities Dealer <ul><li>T he main functions of the securities dealer system in Jamaica include strengthening the primary market by: </li></ul><ul><li>The PD’s provide the role of being the EXCLUSIVE agents for the Purchase, Distribution (sale of derivatives) and Reverse Re-Purchase of BoJ’s Inst. </li></ul><ul><li>Helping to Build a Stable and Dependable Source of Demand for Primary Securities - </li></ul><ul><li>Providing Liquidity in the Secondary Market – </li></ul><ul><li>Devoting Capital Resources to Underwrite Occasional Shortfall of Liquidity – MoFP encourages Private Placements from time to time </li></ul><ul><li>Building Distributional Channels – Acting as an intermediaries between the Government and the end investors </li></ul><ul><li>Providing Market Information – As an intermediaries between the Government and the investors, SD routinely provides key market intelligence to the Central Bank on issues relating prices, volumes and spreads between bids and offers </li></ul>
  7. 7. Basis for Promoting an Efficient Securities Market (Current Practice) <ul><li> Adoption of a Market-based Mechanism for Sale of Medium and Lon g-Term Securities </li></ul><ul><ul><li>Introduction of an auction system in October 1999 </li></ul></ul><ul><ul><ul><li>Contributed to a reduction in interest rates offered on medium-term securities </li></ul></ul></ul><ul><ul><ul><li>Increased Government’s ability to extend the maturity profile of the domestic debt. 65% of new debt has maturity of 5 or more years, compared with 80% with maturity of 3 or more years in previous years </li></ul></ul></ul><ul><ul><ul><li>Successfully auctioned first 3 0-year instrument in domestic market ( August 2002 ) </li></ul></ul></ul><ul><li>Publication of Calendar for Government Securities </li></ul><ul><li>Publication of Key Debt Data and Debt Indicators </li></ul><ul><li>Regular consultation with market makers allowed for greater transparency </li></ul><ul><li>Portfolio Diversification </li></ul><ul><ul><li>Introduction of new instruments, e.g. - US$-linked bonds </li></ul></ul><ul><ul><li>Renewed access to international capital markets since 1997 has helped to broaden the geographic distribution Jamaica external investor base </li></ul></ul>
  8. 8. Standards for Retaining Primary Dealer Designation - BoJ <ul><li>Maintaining the license issued by the Financial Services Commission to deal in securities through satisfactory performance with respect to the various performance standards. </li></ul><ul><li>Maintaining an Operating Account with the Bank of Jamaica </li></ul><ul><li>Adhering to the Bank of Jamaica’s Reporting Requirements </li></ul><ul><li>Satisfying the specified Performance Targets outlined by the Bank of Jamaica (3.0% OMO’s and 5.0% GoJ) </li></ul><ul><li>Declaration holdings in Government of Jamaica Securities denominated in Jamaica Dollars and foreign currency </li></ul><ul><li>Ensuring that primary dealer operations (securities trading) are free from co-mingling with the business of currency trading or deposit taking </li></ul>
  9. 9. : <ul><li>Secondary trades (outright purchase or sale) – volumes, prices/yields, counter party, purchase or sale. This process would be facilitated through a defined template that is available from the Bank of Jamaica. </li></ul><ul><li>Investments in GOJ private offers - as they occur – trade date, security name, nominal amount, tenor, and coupon . </li></ul><ul><li>Outstanding balances for GOJ Jamaica dollar denominated instruments - held on own account (per instrument). Note, as a memo item, the quantity of securities held via custodian services should be identified. </li></ul><ul><li>Outstanding balances in foreign currency instruments held on own account – per instrument . </li></ul><ul><li>Private REPO deals done in JMD, USD, CAD, GBP and Euro . </li></ul><ul><li>Outstanding pvt. REPO Balance in ALL currency </li></ul>Reporting Requirements for Primary Dealers in Jamaica
  10. 10. Regulatory Framework The Regulatory Framework for the efficient functioning of the Securities Dealer Market in Jamaica is organised through the following: <ul><li>Bank of Jamaica </li></ul><ul><ul><li>In 1994 the the Central Bank appointed the first set of SEVEN (7) Primary Dealers to assist in the efficient development of the secondary market for financial instruments. There are very strict reporting requirements for the PD’s, as established by the Central Bank. There are currently FIFTEEN (15) Primary Dealers operating in Jamaica at this time </li></ul></ul><ul><li>Financial Services Commission </li></ul><ul><ul><li>The Financial Services Commission (FSC) came into existence on August 2, 2001 by virtue of the Financial Services Commission Act . It has replaced the Office of the Superintendent of Insurance (OSI) and Unit Trusts and the Securities Commission.  </li></ul></ul><ul><ul><li>The FSC supervises and regulates the securities industry, the insurance industry and soon, the private pensions industry.  As such it may be properly described as an integrated financial services regulator . </li></ul></ul>
  11. 11. Regulatory Framework Cont’d <ul><li>Jamaica Securities Dealers Association </li></ul><ul><li>The Jamaica Securities Dealers Association (JSDA) came into existence on September 11, 2002 , as a form of self regulation of Securities Dealers. </li></ul><ul><li>Office of the Registrar of Companies </li></ul><ul><li>Which enables the legal creation and operation of businesses and the protection of intellectual property in order to promote trade, commerce and wealth creation </li></ul><ul><li>The ORC registers companies operating in Jamaica and provides for an annual statutory reporting requirement </li></ul>
  12. 12. Reasons for Issuance Domestic Debt The Government’s borrowing requirements for each financial year are determined by the MoFP, based on the fiscal programme, and are set out in the budget presented to Parliament at the beginning of the financial year. The Minister of Finance and Planning also presents the Debt Management Strategy to the Parliament at the beginning of the financial year. The strategy accounts for the past financial year and outlines the plans for the current year and the medium-term. Since 1999, the strategy has been published with widespread circulation including that via the internet . <ul><li>The primary reasons for issuing Domestic Debt are : </li></ul><ul><li>Financing of the Budget Deficit </li></ul><ul><li>Development of the Local Capital Market </li></ul><ul><li>Conversion of Losses incurred by the central bank </li></ul><ul><li>Assumption of certain Contingent Liabilities </li></ul><ul><li>Assumption of certain Public sector Debts </li></ul>
  13. 13. Type of Instruments Currently in Issue The Government currently employs a variety of debt instruments to satisfy its borrowing requirements. The instrument marketed is a function of the effective portfolio management as well as the implementation of the debt strategy. The type of instruments offered and managed in Jamaica are long, medium and short term in nature and include : <ul><ul><ul><li>Local Registered Stocks </li></ul></ul></ul><ul><ul><ul><li>Treasury Bills </li></ul></ul></ul><ul><ul><ul><li>Investment Debentures </li></ul></ul></ul><ul><ul><ul><li>Variable Rate Investment Bonds </li></ul></ul></ul><ul><ul><ul><li>Fixed Rate Registered Bonds </li></ul></ul></ul><ul><ul><ul><li>US$ Indexed Linked Bonds </li></ul></ul></ul><ul><ul><ul><li>US$ Denominated Bonds </li></ul></ul></ul><ul><ul><ul><li>Land Bonds </li></ul></ul></ul><ul><ul><ul><li>Commercial Loans </li></ul></ul></ul>
  14. 14. Stock of Outstanding Domestic Debt (by Loan Type) (Sept 2006)
  15. 15. Holders of GoJ LRS and Investment Debentures/Bonds (August 2006)
  16. 16. Holders of GoJ US$ Bonds and Notes (A ugust 2006)
  17. 17. Stock of Outstanding External Debt (by Creditor Category) (Aug 2006)
  18. 18. Bank of Jamaica Open Market Operations (Outstanding COSH’s J$Mn)
  19. 19. Challenges to an Efficient and Effective Securities Market <ul><li>Potential for Oligopoly </li></ul><ul><li>Possibility of collusion may arise </li></ul><ul><li>No anti trust legislation exist at this time </li></ul><ul><li>Thin Market </li></ul><ul><li>Insufficient Competition </li></ul><ul><li>End Investors get the Raw Deal </li></ul><ul><li>Liquidity challenges </li></ul><ul><li>Priorities of Government </li></ul><ul><li>Commitment to the development of the Securities Market </li></ul><ul><li>Regulation </li></ul><ul><li>Inflexibility of regulators </li></ul>
  20. 20. List of Designated BOJ Primary Dealers (15) Alliance Investment Management Limited Barita Investments Limited Capital & Credit Securities Limited Citifinance Limited Dehring, Bunting & Golding Limited First Global Financial Services Limited FirstCaribbean Int’l Securities Limited Jamaica Money Market Brokers Ltd. JN Fund Managers Ltd. Mayberry Investments Limited NCB Capital Markets Limited Pan Caribbean Financial Services Ltd. RBTT Securities Jamaica Limited Victoria Mutual Wealth Mangt. Ltd Scotia Jamaica Investment Management Limited
  21. 21. Are there any Questions?

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