What is the Regional Government Securities
Market
Why should I consider purchasing
government securities?
What are government securities?
How will ownership be recorded?
What is the ECCB’s role in the
Regional Government Securities Market?
Can I sell my securities before maturity?
What is an intermediary?
Can I use my securities as collateral?
How are government securities sold?
What happens when my security matures?
How can I get information on upcoming
issues?
How do I receive interest and principal?
How can I buy government securities?
As a potential investor what type
of information should I consider?
How can I get more information about
the market?
Who will regulate issuers of government
securities?
What is the Regional Government Securities Market
The eight ECCB member countries (Anguilla, Antigua and
Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis,
St. Lucia, St. Vincent and the Grenadines) have agreed
to establish a regional market for government securities,
with the assistance of the Eastern Caribbean Central Bank.
The regional market allows member
governments to issue their securities throughout member
countries, allowing residents of these countries to
buy the securities of their choice. This initiative
will enhance the investment options available to investors
by enabling investment opportunities beyond the domestic/home
market to the wider region.
top ^
What are government securities?
Government securities are financial instruments including
treasury bills, notes and bonds that are issued by a government
and sold to the public to pay off maturing debt and raise
capital needed to finance Government expenditure. Backed
by the full faith and credit of the issuing Government,
these instruments are usually considered safe investments.
Treasury Bills are short-term
instruments issued with a term of one year or less.
They are sold at a discount from face value (par), and
do not pay interest before maturity. The difference
between the purchase price of the bill and the amount
that is paid at maturity (par), or when the bill is
sold prior to maturity, is the interest earned on the
bill.
Treasury Notes and Bonds bear a stated
interest rate, and the owner receives periodic, typically
semi-annual interest payments. Treasury notes have a
term of more that one year but less than ten. Treasury
bonds are long-term instruments issued with a term of
more than 10 years.
top ^
What is the ECCB’s role in the Regional
Government Securities Market?
The Eastern Caribbean Central Bank acts as Fiscal Agent
to Governments. In this role, the ECCB assists the Governments
by facilitating the operations of the RGSM.
top ^
What is an intermediary?
An intermediary is an entity (broker dealer, broker,
custodian) that provides financial services to investors.
These services include buying and selling of securities
on behalf of investors and securities custodian services.
Intermediaries dealing in securities must be licensed
by the Eastern Caribbean Securities Regulatory Commission
(ECSRC).
top ^
How are government securities sold?
When a government brings a new issue of securities (treasury
bills, notes and bonds) to the market for the first
time, it does so through the primary market. Government
securities issued on the regional market are sold via
the Eastern Caribbean Securities Exchange (ECSE) Ltd.
Treasury Bills are sold on the regional
market through a single price auction where the yield/price
of the security is determined by competitive bidding
by investors. Each investor must submit a bid specifying
a yield or price for a specified quantity of securities.
Those bids that fall within the range accepted by the
auction will be awarded the security. Each successful
investor pays the same price (or receives the same yield)
for their securities. The risk associated with competitive
bidding is that an investor might bid a yield that is
too high and not obtain the quantity requested.
Treasury Notes and Bonds may be sold
on the regional market through an auction (as explained
above) or on a fixed price subscription basis where
the price is determined by the government before issuing
the securities, and the investor submits an application
for only an amount. Bonds and notes may be sold at par
(face value), discount or at premium, that is, a price
above the face value. Member governments usually sell
their bonds at par value.
top ^
How can I get information
on upcoming issues?
Announcements with information on securities to be issued
on the regional market are provided to the market quarterly.
These announcements provide a quarterly calendar with
details on upcoming issues which include: the type of
instrument, issuing government, issue date, terms and
conditions, auction or subscription date, maturity date,
and deadline date for submitting bids, names and addresses
of licensed intermediaries participating in the government
securities market.
Announcements are also provided in regional
newspapers, member governments’ gazettes and on
ECCB and ECSE websites. In addition, three weeks before
the auction date, the government issuing the securities
provides a press release with details on the issue.
This announcement serves to reconfirm details provided
to the market.
top ^
How can I buy government securities?
Persons wishing to purchase government securities issued
on the regional market may do so by using the services
of a broker dealer that is licensed by the Securities
Regulatory Commission and is a member of the ECSE. The
manes of intermediaries dealing in the government securities
will be provided in announcements to the market.
Intermediaries will place bids for securities
on behalf of their customers to the ECSE. Investors
should submit their application for securities before
or by the deadline stipulated in the announcements for
the issue.
top ^
Why should I consider purchasing
government securities?
Government securities provide a good savings option
as they are generally risk free and provide a higher
return than that which can be received from a regular
savings account Currently, Interest rates on treasury
bills and bonds issued in the region are generally higher
than rates fixed deposits offered by commercial banks.
In addition, government bonds are generally ideal for
savings as they provide long-term savings options. Whether
you are saving for a new home, your children’s
education or retirement, government bonds can help you
reach your financial goals with safety and at market
based yields.
top ^
How will ownership be recorded?
Investors will receive a confirmation notice indicating
the success of their application for securities. This
notice indicates the amount of securities allotted to
the investors and the market yield/price for those securities.
Securities are issued to investors in a dematerialised
form, which simply means that ownership of the securities
is recorded and maintained electronically by the Eastern
Caribbean Securities Registry (ECSRC). Investors will
not receive printed certificates as previously done,
but will be provided with regular statements of their
holdings at the Registry. These statements are legally
considered as evidence but not proof of ownership.
Dematerialisation of securities offers
several advantages over printed certificates including
easy trading of securities and elimination of risks
associated with theft and loss or destruction of physical
certificates.
top ^
Can I sell my securities before
maturity?
Yes. The Eastern Caribbean Securities Exchange (ECSE)
Ltd provides investors with the opportunity to sell
and buy securities (government securities, shares and
other financial instruments) on the secondary market.
As on the primary market, investors will need to place
their orders to sell or buy securities through a licensed
intermediary.
top ^
Can I use my securities as collateral?
Yes, you may pledge your government securities as collateral
for financial obligations such as loans. Pledging of
securities is done at the Eastern Caribbean Securities
Registry (ECSR) where ownership of the securities is
held and recorded.
top ^
What happens when my security matures?
On maturity date, each investor will be paid an amount
equal to the face value (principal and interest) in
respect of their holdings of the specific security.
top ^
How do I receive interest and principal?
When submitting applications for an issue of securities,
investors must provide the intermediaries acting on
their behalf with bank details such as the name and
address of the bank and the bank account number to which
they want their principal and interest payments deposited.
(Payment may also be made by cheque.
top ^
As a potential investor
what type of information should I consider?
In bringing an issue of securities to the market, the
Government is required to disclose certain information
to the market. This information provides prospective
investors with insight into the fiscal performance of
the government and the economic performance of the country
to enable them to make informed investment decisions.
An investor’s assessment of a
government should include an examination of the country’s
level of outstanding debt, in particular outstanding
debt to GDP and debt interest payments to current government
revenue. Such ratios and data provide some indication
of the country’s ability to meet current and future
debts obligations.
top ^
Who will regulate issuers
of government securities?
Regulation of the activities of the issuers (governments)
is the responsibility of the Regional Debt Co-ordinating
Committee (RDCC), which comprises the Head of Finance
(Financial Secretaries/Directors of Finance) of each
member country.
top ^
How can I get more information
about the market?
An investor may obtain additional information about
the Regional Government Securities Market from:
i) The Ministry of Finance and Treasury
Department of the member country;
ii) The ECCB
as Fiscal Agent; and
iii) intermediaries established in the market.
Information on the activities of the regional market
is also provided on the ECSE website at www.ecseonline.com.
top ^
|
RGSM