Dealers Seek To Deepen Money, Gilts Markets

Indias primary dealers yesterday said they would submit a series of recommendations to the RBI to deepen both the money and gilt markets.

The Primary Dealers Association (PDA) has made this a priority since the six primary dealers formed their self-regulatory organisation last month.

The body will take up issues for streamlining and developing the market, Kishore Chaukar, managing director of ICICI Securities and Finance Limited said.

Among the proposals that will be made to the RBI is permission for primary dealers to buy and sell a security on the same day even if they do not have an underlying position because this would add to the liquidity in the market.

 

They will ask to permit trade in STRIPS (Separate trading of registered interest and principal securities) to increase the variety of instruments in the market and thus deepen the secondary gilts market.

The association wants announcement of an auction calendar for government securities.

It wants permission for when issued market trading to aid price determination.

It is asking for the issue of treasury bills with smaller intervals to prevent bunching of inflows and outflows in the banking system.

It is requesting the RBI to permit foreign institutional investors to participate in the treasury bills market.

It will also ask for updating of post auction information to include the weighted average price of the total bid amount that will enable market participants to refine the price discovery mechanism.

It will ask the central bank to modify the statutory general ledger to include the trade date, which will give a clearer indication of gilts prices.

The PDA appointed S K Mukherjee, managing director of Discount and Finance House of India, Indias first primary dealer, as its chairman.

The organisation will function as a forum for discussing various administrative issues related to primary dealers and the money and gilts market and will take up the issues with the RBI, said Y P Narang, managing director of the New Delhi-based PNB Gilts Limited.