The Bank of Jamaica is ending over-the-counter sale of government securities, telling investors they will have go through official broker/dealers for such transactions with the May 1 launch of the BOJ's fixed-income central-securities depository (CSD).

"Walk-ins to BOJ to purchase securities will now have to go through a dealer," Livingstone Morrison, the central bank's deputy governor, who spearheaded the establishment of the CSD, told Wednesday Business. "... It's just a small proportion that comes to the bank. The vast majority already go through a dealer."

The specific number of value of the transactions handled directly by the BOJ was not immediately available. But the move by the central bank will mean additional business for some, if not all, of the registered 42 securities dealers in a market for BOJ instruments.

Electronic system

With the launch of the CSD, and a related electronic clearing system, Jamaican government securities will no longer be available in paper form. Instead, an electronic transfer of ownership of the instrument will take place upon purchase.

As part of the arrangement, all investors will be required to provide Taxpayer Registration Numbers to their dealers in order for their account to be established.

The system will automatically generate beneficiary accounts for purchasers, which will carry information such as how and where they are to be paid interest as well as principal on maturity. Investors can also request portfolio statements from the Bank as well as reports on their accounts from their dealers at a fee to be determined.

Monitor policy

The BOJ said its retreat from direct sale of its government instruments will remove it from direct competition with dealers. However, the central bank intends to watch closer the pricing policy of dealers to ensure that that their costs remain reasonable, especially to the market's smaller players.

"We will see to it that fees are being kept at a minimum," Morrison said. "We have already taken steps by absorbing a significant portion of the cost to establish this system."

According to Morrison, the BOJ is working on a schedule to bring all government instruments into the depository, a move that will take several years.

"BOJ has about 7000 certificates (and) these will take a relatively short time period," he said. "But the GOJ, with over $1 trillion in debt, will take some time."