In a significant move to modernise public debt management and deepen the secondary bond market, the Finance Division has introduced a comprehensive set of updated guidelines for primary dealers-institutions authorised to trade in government securities.

The new regulations, which came into effect on 8 July, aim to boost market liquidity, enhance transparency, and expand the investor base for government bonds.

They form part of a broader government strategy to establish a well-functioning bond market that supports long-term financing, efficient debt servicing, and private sector access to competitive borrowing.

Under the new framework, each primary dealer is required to maintain a minimum annual secondary market turnover of Tk 3,000 crore, or an amount equivalent to their Statutory Liquidity Ratio (SLR) holdings-whichever is higher.

The SLR represents the portion of a financial institution’s deposits that must be held in liquid assets, including government securities. Furthermore, dealers must fulfil at least 25 percent of this turnover requirement each quarter.

Currently, Bangladesh has 24 authorised primary dealers, consisting of banks, non-bank financial institutions, and their subsidiaries. To retain their dealer status, these entities must now comply with more rigorous technical, financial, and operational standards.

The updated policy mandates that primary dealers act solely as market makers in both the primary and secondary government securities markets.

They are barred from undertaking other banking functions such as accepting deposits and must ensure their trading desks remain open throughout business hours to enable real-time price discovery.

To encourage active secondary trading, primary dealers are required to classify at least 15 percent of securities acquired through auctions as ‘held-for-trading’ (HFT) for a minimum of three months or until sold.

Additionally, at least 30 percent of their total government securities portfolio must be maintained in the HFT category to enhance market liquidity.

The new bidding structure divides obligations as follows: 60 percent is tied to a dealer’s total demand and time liabilities, while the remaining 40 percent is distributed equally among all primary dealers or as determined by the auction committee. Each dealer must maintain a minimum bid success rate of 60 percent.

Dealers must ensure adequate funding in their Bangladesh Bank settlement accounts on auction days and adhere to bidding limits-typically capped at 75 percent of the auctioned amount, unless otherwise instructed.

They are also required to maintain dedicated accounting records and operate a specialised window to facilitate investor transactions in government securities.

To encourage wider retail investor participation, primary dealers will be expected to facilitate trading on the stock exchange in addition to using the central bank’s electronic trading platform.

The Finance Division, in collaboration with Bangladesh Bank, will conduct annual performance reviews of all primary dealers. Institutions found in breach of the regulations or failing to meet performance benchmarks may face penalties, including suspension or loss of their dealership status.

Dealers are also obliged to submit quarterly performance and development reports, ensuring enhanced transparency and ongoing regulatory oversight in line with the government’s evolving financial policy framework.