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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. 
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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.
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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.
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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.
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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.
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The Regional Government Securities Market