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| Sunday, 15 December 2002 |
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Cost reductions envisaged with scripless transactions Sri Lanka is the first country in the region to install the Real Time Gross Settlement (RTGS) system and the Scripless Securities Settlement System (SSSS) simultaneously, which are expected to go live from September 2003. Dr Ranee Jayamaha, Assistant to the Central Bank Governor told the first national conference on Fixed Income Securities last week that once the system is in place, transaction, opportunity and capital costs will come down with no paper being issued while it will create more opportunities for primary dealers to enter the market. The Central Bank plans to install the RTGS next July and the SSSS next August. A.S. Jayawardena, Governor Central Bank, who made the keynote address, said efficient financial markets are essential for sustained development. He said the development of the domestic debt securities market is a high priority on the agenda of current financial sector reforms as this results in a high level of development. At the macro level, it provides domestic financing of budget deficits, thereby reducing the build-up of foreign currency debt. It also strengthens the transmission and implementation of monetary policy including the achievement of monetary targets and inflation objectives while enabling the use of market-based indirect monetary policy instruments. Market-oriented funding of the budget deficit reduces debt service costs in the medium to long term through the development of a deep and liquid market for government securities. At the micro level, it increases overall financing stability and improves financial intermediation through greater competition and development of related financial structures, products and services development of a securities market. It changes the financial system from bank-oriented to a multi-layered system where capital markets compliment bank financing. This would activate banks to develop new products and provide credit more competitively. Jayawardena said there is a general consensus worldwide that deep and liquid financial markets, particularly government securities markets, are required to ensure an efficient and robust financial system. Participants are more willing to transact and take positions in markets where they expect liquidity to continue at a high level for the foreseeable future while this willingness to transact in turn contributes towards enhanced liquidity. K.G.D.D. Dheerasinghe, Superintendent of Public Debt Central Bank said that the future of Sri Lanka's government securities market will depend to a large extent on the proposed infrastructure. The proposed system will help the government securities market to develop and will consist of a central depository, trade recording system, real time gross settlement system and an electronic fund transfer system. He said the Central Bank does not intend to introduce secondary dealers at the moment though there were discussions earlier. Vishnu Deuskar, CEO of ABN AMRO Securities India, speaking on the theme 'Think like a bond trader', said the success of a bond trader depends on the ability to predict the future shape of the yield curve, swiftness and decisiveness of execution and the awareness of risk. It is also important for a bond trader to understand what information the yield curve conveys. He said a good bond trader can be created. They should have an eye on the market and an ear on the ground. They should have high standards of ethics, but always look for value while knowing the strengths and limitations. Speed of decision making, courage to take losses, courage to be a contrarian and loving the job are essential to be a good bond trader, he said. Deuskar said that even in a market where the interest rate is going down, there should be some trading to make a profit and re-enter when the time is opportune. He said he will not recommend short selling unless certain conditions are met. Ajantha Madurapperuma, President Association of Primary Dealers, outlining the future plans of the Association, said that they are trying to hold a regional conference of primary dealers and form a regional association of primary dealers. He said the Association is also moving towards self regulation to ensure the highest standard of ethics. (SG) |
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