Business
Ghana Regulators Plan Market Makers to Boost Bonds With Live Prices
Ghanaian regulators are planning to introduce market making, set up live trading and start debt education programs in a bid to boost bond-market activity in West Africa’s second-biggest economy.
After last year’s merger of securities depositories by the central bank and stock exchange, bond trading is still illiquid because there’s no electronic platform for debt, unlike equities, said Stephen Tetteh, chief executive officer of the Accra-based Central Securities Depository Ghana Ltd. As the unified storehouse works to integrate platforms, Tetteh stated they’re asking the government to change laws to help increase trading.
Tetteh said, “The Securities and Exchange Commission is working on market makers who go in just to bring liquidity onto the market.” He also went on t o say, “We have drawn programs to go out and do a lot of education to teach people what they can do with the bond market. Once we get that, then our market will bring that liquidity.”
Ghana’s plans to boost trading come as the government raises bond issuance this year to fund a budget deficit forecast by the Finance Ministry in order to narrow it to 8.5 percent of gross domestic product this year from 10.2 percent in 2013. Currently, the world’s second-biggest cocoa producer will sell 35 percent more cedi debt this year and wants to offer a 10-year note, which will be the longest local-currency term, in June.
Market Need
Tetteh indicated that live trading may happen within a year. Also this year, the securities commission may ask Parliament to pass a law allowing market making, Director General Adu Anane Antwi said. The SEC, which currently issues broker-dealer permits to traders, wants to license banks and brokers to operate as market makers, he said, on Jan. 29, in a phone interview. They will have the capital to buy securities in large amounts and sell when the market is in need, he advised. The government cabinet is considering the proposal, a precursor to legislative approval.
Ghana’s central bank last April threatened to cancel the licenses of primary dealers for not participating in government debt auctions. Linking the depositories, which happened on Dec. 24, will provide stock brokers access to the bonds depository to check on ownership.
“This by itself is expected to increase bonds trading,” Tetteh said. Brokers currently can’t access the bonds because the depositories are separate and the merged entity has one year to complete its integration, he said.
