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, Commonwealth of 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 and bonds and have varying maturities. These securities are backed by the full faith of the governments of the issuing member states.
The RGSM was established to assist with the following:
- To supplement the financing needs of member governments
- To minimise the borrowing costs of member governments and assist in overall debt management
- To deepen the region’s financial markets by integrating the eight fragmented markets of the ECCU, thereby creating a single regional financial space
- Assist in regional development by expanding the investment opportunities for regional and international investors.
Types of Instruments
There are two major types of securities, which are currently on the RGSM with varying maturities: Treasury bills and bonds. The maturities of these securities currently range from 91 days to 15 years. Treasury bills are often issued at a discount with maturities of less than a year. Bonds are coupon securities with maturities greater than a year.
The RGSM currently utilises the platform of the Eastern Caribbean Securities Exchange (ECSE) for its primary market activity. The ECSE and its subsidiaries, the Eastern Caribbean Central Securities Registry (ECCSR) and the Eastern Caribbean Central Securities Depository (ECCSD) provide the infrastructure for the trading, clearance and settlement of securities on the Regional Government Securities Market (RGSM).
Securities on the RGSM are issued in a dematerialised (paperless) form, which means that ownership of securities are recorded and transferred electronically. Settlement takes place at T+1, one day after the auction date.
Government securities issued on the RGSM are done via an auction process which is used to determine the security’s rate or yield. Securities are issued based on needs of participating governments. Auctions are held according to the Regional Issuance Calendar, which outlines the upcoming auctions of participating Governments.
Regional Calendar of Issues
The Regional Calendar outlines the key information on participating governments’ upcoming issues on the RGSM. The Calendar includes the auction dates, the tenor and the issue amount of these securities for the calendar year. The Regional Calendar is usually updated monthly to enable sufficient planning by investors who wish to participate in an auction. Currently, the Regional Issuance Calendar is available on the ECCB, the ECSE and government websites.
Currently, the securities on the RGSM are auctioned using a uniform competitive price format. This auction methodology ensures that all successful competitive bids will be allotted at a single, uniform rate. This rate represents the highest cut-off rate of all the successful bids submitted at the auction.
Auctions are currently held one day prior to the issue date, and are usually held from 9:00 am to 12:00 noon, Eastern Caribbean time in the case of local currency securities. Auctions for government securities issued in foreign currency close at 11am, same day.
Securities on the RGSM are open to all potential investors. However, only licensed intermediaries are allowed to place a bid in the RGSM auctions. Thus, all applications for participation in auctions should be submitted through one of the licensed broker dealers (intermediaries). A list of licensed broker dealers is available on the ECSRC website.
The minimum bid amount on the RGSM is currently set at XCD5000.00, with a bid multiplier of XCD1000.00.
Licensed Broker Dealers
Investors wishing to participate in an RGSM auction should do so through the services of one of the licensed intermediaries.
The Regional Debt Coordinating Committee (RDCC) currently has direct oversight for the RGSM. The RDCC was established by the Monetary Council to ensure that the market operates efficiently within the context of harmonised objectives, policies and procedures. The RDCC comprises Financial Secretaries and/or Directors of Finance from each of the eight participating governments of the ECCU as well as the Governor of the ECCB.
The RDCC requires that each participating government submit a prospectus before going to market for a primary issue. The prospectus is usually published at least two weeks prior to the issue and discloses vital information on the issue as well as the country’s macroeconomic performance. In addition to the prospectus, participating governments are required to present regular updates on the economic and financial performance of their country. This ensures that investors are kept apprised of the performance of the issuing governments.
The Eastern Caribbean Central Bank performs the role of Fiscal Agent to Participating Governments. The Bank therefore advises governments on the most appropriate instruments to issue within the context of sound debt management 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.