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Regional Government Securities Market (RGSM) Frequently Asked Questions

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 ^



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