with Industry Partners
Securities (Amendment) Bill 2009
play an important role as specialist intermediaries
in the Singapore Government Securities (SGS) and Singapore
dollar markets. Specifically, they undertake and fulfill
market-making obligations, such as providing liquidity
in the SGS market, underwriting SGS issuance, providing
market feedback, and contributing to the development
of the SGS and related interest rate markets. To foster
further growth and development of the Singapore debt
market, MAS regularly consults with market participants,
including Primary Dealers.
made three amendments to the Government Securities
Act (GSA) in January 2010, namely, allowing early
redemption of SGS, empowering MAS to regulate Primary
Dealers and allowing MAS to enter into securities
lending arrangements using SGS.
The first amendment
to the GSA to allow the Government to redeem SGS before
maturity at market price is, in fact, a common practice
in developed markets. This will provide greater flexibility
in the management of SGS. Prior to this, if MAS were
to conduct buy-back operations for illiquid issues
to concentrate liquidity in key benchmark issues,
the securities bought back would be kept on MAS’
books until maturity. As premature redemption of these
securities had not been allowed previously, the Government
would have had to continue paying interest on these
securities to MAS.
The second amendment
formalises MAS’ existing relationship with Primary
Dealers, similar to how it regulates banks under the
Banking Act. Specifically, the amendment empowers
MAS to appoint and regulate Primary Dealers as well
as to issue directions, revoke, suspend and inspect
the Primary Dealers.
The final amendment
formalises the securities lending arrangements between
MAS and Primary Dealers. MAS operates a repo facility
that lends SGS to Primary Dealers on an overnight
basis when the SGS are not readily available from
other sources. This provides Primary Dealers with
greater confidence to carry out their duties as market-makers.
They will be better able to deliver SGS to clients,
further boosting the liquidity, efficiency and robustness
of the government securities market.
the first and third amendments enhance MAS’
repo facility by expanding the amount of SGS which
MAS can lend beyond its own holdings. When demand
for specific bonds exceeds MAS’ holdings, the
Government can issue new SGS to MAS to on-lend to
Primary Dealers on an overnight basis. These SGS will
then be redeemed the following day.
BNP Paribas, Singapore
branch (BNPP), commenced operations as the 12th Primary
Dealer on 18 January 2010. The addition of BNPP to
the Primary Dealer community will add to the vibrancy
of the SGS and Singapore dollar markets.