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The Regional Government Securities Market
Overview
The Regional Government Securities Market
RGSM FAQ's
The Eastern Caribbean Enterprise Fund

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Performance Update of the RGSM at December 2007 (pdf)
           
Background Objectives Types of Instruments
           
Legislation Governance   Securities Issuance
           
Frequently Asked Questions Calender of Issues Auction Results
           
Prospectus Information
(Listed under Calendar of Issues)
       
           
Secondary Market Trading Information

BACKGROUND
The Regional Governments Securities Market (RGSM) is a regional market for the trading of debt instruments of the member states of the ECCU which comprise Anguilla, Antigua and Barbuda, Dominica, Grenada, Montserrat, St Kitts and Nevis, Saint Lucia, and St Vincent and the Grenadines. The market was established in November 2002 and operates on a fully electronic platform. The instruments on the RGSM take the form of Treasury-bills, notes and bonds and have varying maturities. These securities are backed by the full faith of the governments of the issuing member states.

OBJECTIVES
The RGSM was set up to assist the governments of the member states with the following:

• To supplement the financing needs of the member governments of the ECCU
• To minimise the cost of borrowing for member governments and assist in their
   overall debt management.
• To deepen the region’s financial markets by integrating the eight fragmented
   member governments of the ECCU and creating a single regional financial space.
• To provide more opportunities for regional and international investors in the
   development of the region through investment in these securities.  top ^

TYPES OF INSTRUMENTS
The RGSM currently issues two types of securities with varying maturities: Treasury bills and bonds. Treasury bills are often issued as discount securities with maturities of less than a year and bonds are coupon securities with maturities greater than one year. Governments on the RGSM currently issue T-bills with maturities of 91 days and 365 days, as well as bonds at maturities of 5 years, 7 years, as well as ten years.

The table provides a summary of the range of securities on the RGSM:
Instrument Maturity Minimum Investment
Treasury-bills 91 days $5000
  365 days $5000
 
Bonds 5 years $5000
  7 years $5000
  10 years $5000


LEGISLATION
The Regional Government Securities Market is regulated by the Eastern Caribbean Securities Act. All 8 member countries participating in the market have passed the Act which sets out the laws under which the market must operate. In keeping with the Securities Act, the Eastern Caribbean Securities Regulatory Commission (ECSRC) has been set up to ensure that the market adheres to international best practices.

The ECSRC requires that each government submit a prospectus before going to market for a primary issue. This prospectus is usually published at least two weeks prior to the issue and discloses vital information such as the amount and type of security, the terms of the security including the maximum interest rate, the denominations of the issue as well as the country’s macroeconomic performance which enable investors to make informed investment decisions.

Having listed securities on the ECSE, governments are required to present semi-annual updates on the economic and financial performance of their country. This keeps investors updated on the performance of governments. top ^

GOVERNANCE
The Eastern Caribbean Central Bank performs the role of fiscal agent to the participating governments. Thus, the Bank advises governments on the most appropriate instruments to issue within the context of sound debt management policies/practices, as well as the most appropriate time to issue securities on the primary market. The ECCB also undertakes some of the administrative duties associated with the issue. However, each government is responsible for the full repayment of the instruments it issues.

The Regional Debt Coordinating Committee, the RDCC, comprises Financial Secretaries/Finance Directors from each of the 8 participating governments and the Governor. The Committee has been set up by the Monetary Council to ensure that the market operates efficiently within the context of harmonized objectives, policies, procedures and rules. The RDCC is responsible for ensuring that the governments comply with established disclosure requirements. top ^

SECURITIES ISSUANCE
Frequency
These securities are issued to the market via auctions. Auctions are used to sell these securities and to determine their rate or yield. Auctions are held according to the needs of participating governments. Auction dates are published on the ECCB and ECSE websites based on the Issuance Calendar.

Issuance Calendar
The Schedule of auctions specifies the auction dates, the issue dates and the tenor of each issue. Currently, there is no set schedule for the issuance of different tenors. The Auction Schedule is usually published and updated regularly thus enabling sufficient planning for investors who wish to participate in an auction. The issue size is often not published far in advance in the Calendar of issues, but specified in the auction announcements. Auction announcements on size are made at least 5 days before the auction date.

Form
The RGSM operates in dematerialised form, which means that ownership of securities are recorded and transferred electronically. Settlement takes place at T+1, that is, one day after the auction date.

Rates and Auction Format
Currently, RGSM securities are auctioned using a uniform price auction format. This auction methodology ensures that all successful competitive bids will be allotted at a single, uniform rate. This represents the highest cut-off rate of all successful bids, submitted at the auction.

Auctions are held one day before the actual issue date. Auctions are held from 9 am to 12 noon Eastern Caribbean time.  top ^

Structure of Securities
Currently, the RGSM issues a small range of instruments, comprising Treasury bills and Treasury bonds. T-bills are often issued as zero-coupon instruments which means that they are bought at a discount from the face value. However, investors receive the full amount at maturity.

Bonds are longer term instruments and are often issued in maturities of five, seven and ten years. These securities carry a fixed semi-annual coupon/rate ie interest is often paid semi-annually on the face value.

Admission/Participation
Securities on the RGSM are open to all bidders, residents and non residents. However, only licensed brokers will be allowed to bid in the RGSM auctions.

Minimum Bids
The minimum bid amount on the RGSM is currently set at $EC5000.

Licensed Brokers
Investors wishing to participate on the RGSM must do so through the licensed brokers. Securities are therefore bought through intermediaries or licensed brokers that currently operate in seven of the eight member territories.    top ^


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