KARACHI: The State Bank of Pakistan (SBP) intends to introduce an electronic bond trading platform early next year to provide investors real-time information about market yields resulting in enhanced liquidity and better price discovery in the fixed-income market.
This was stated by Governor State Bank, Syed Salim Raza, in a keynote address on ‘Developing Next Generation Capital and Commodity Markets Ecosystem in Pakistan: Creating Value, Inclusive Growth in the Society’ at the South Asian Federation of Exchanges (SAFE) country roundtable held here on Thursday.
Salim Raza said that in the initial stage only sovereign paper will be traded on the platform resulting in a liquid sovereign yield curve that would provide better representative benchmarks for issuance of corporate debt instruments.
This platform will also help in shifting government debt from banks to other institutional investors thus freeing up funds for private sector credit hence facilitating the development of real economy, he added.
The SBP governor said he believes that there is a room to accommodate more investor groups in the local currency government debt programme and one such group might consist of investors currently accessing the National Savings Scheme (NSS).
He said it would be more efficient for the government and the investors, to rationalise the issuance process.
This would enable an improved pricing strategy, eliminating the need to give away embedded put options which are available to investors free of cost, he said and added it will also provide higher liquidity to the investors for their holding by making the debt tradable among all investors, residents and non-residents, corporate and individuals.
It is expected that technological innovation would be at the forefront of such development, introducing transparent electronic trading and mechanism to minimise the resultant settlement and price risk.—APP
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