No. 4/20/DPM Jakarta, November 18, 2002 CIRCULAR LETTER Subject: Procedure for Issuance, Trading, and Administration of Bank Indonesia Certificates In regard to the enactment of Bank Indonesia Regulation Number 4/9/PBI/2002 dated November 18, 2002, concerning Open Market Operations (State Gazette of the Republic of Indonesia Number 126 of 2002, Supplement to the State Gazette of the Republic of Indonesia Number 4243) and Bank Indonesia Regulation Number 4/10/PBI/2002 dated November 18, 2002, concerning Bank Indonesia Certificates (State Gazette of the Republic of Indonesia Number 127 of 2002, Supplement to the State Gazette of the Republic of Indonesia Number 4244), it is necessary to enact implementation guidelines concerning the issuance, trading, and administration of Bank Indonesia Certificates as follows: 1. GENERAL REVIEW 1. Bank is a Commercial Bank as referred to in Act Number 7 of 1992 concerning Banking as amended by Act Number 10 of 1998, conducting conventional banking operations; 2. Open Market Operations, hereinafter referred to as OMOs, are activities conducted by Bank Indonesia in money market transactions with Banks and other parties for the purpose of monetary control; 3. Bank ...
Transcript
No. 4/20/DPM Jakarta, November 18, 2002
CIRCULAR LETTER
Subject: Procedure for Issuance, Trading, and Administration of Bank Indonesia
Certificates
In regard to the enactment of Bank Indonesia Regulation Number 4/9/PBI/2002
dated November 18, 2002, concerning Open Market Operations (State Gazette of the
Republic of Indonesia Number 126 of 2002, Supplement to the State Gazette of the
Republic of Indonesia Number 4243) and Bank Indonesia Regulation Number
4/10/PBI/2002 dated November 18, 2002, concerning Bank Indonesia Certificates (State
Gazette of the Republic of Indonesia Number 127 of 2002, Supplement to the State
Gazette of the Republic of Indonesia Number 4244), it is necessary to enact
implementation guidelines concerning the issuance, trading, and administration of Bank
Indonesia Certificates as follows:
1. GENERAL REVIEW
1. Bank is a Commercial Bank as referred to in Act Number 7 of 1992
concerning Banking as amended by Act Number 10 of 1998, conducting
conventional banking operations;
2. Open Market Operations, hereinafter referred to as OMOs, are activities
conducted by Bank Indonesia in money market transactions with Banks and
other parties for the purpose of monetary control;
3. Bank ...
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3. Bank Indonesia Certificates, hereinafter referred to as SBIs, are securities
denominated in the Rupiah currency, issued by Bank Indonesia as short-term
debt instruments;
4. SBI Auction is the sale of SBIs conducted by Bank Indonesia within the
framework of implementation of monetary policy;
5. Broker is a money market broker and securities dealer-broker appointed by
Bank Indonesia;
6. Stop-out Rate, hereinafter referred to as SOR, is the highest discount rate
obtained in auction within the framework of achieving the quantitative target
for SBIs to be sold by Bank Indonesia;
7. Automatic Bidding System, hereinafter referred to as ABS, is a system for
bidding for funds and securities from Banks or Brokers on-line and in real
time, within the framework of OMOs;
8. SBI Transactions conducted under Repurchase Agreement, hereinafter referred
to as SBI-Repo, are SBIs sold under the condition of mandatory repurchase by
the seller at an agreed price and term;
9. Outright SBI Transactions, hereinafter referred to as SBI-Outright, are
transactions in the sale or purchase of SBIs without recourse, without any
obligation for repurchase or resale;
10. SBI Administration Accounts are securities accounts used for registering
ownership of SBIs at the Central Registry, and consist of SBI Trading
Accounts and SBI Collateral Accounts;
11. SBI Trading Account is a securities account used for registering ownership of
tradable SBIs;
12. SBI Collateral Account is a securities account used for registering ownership
of SBIs secured as collateral;
13. Demand Deposit Account is a Rupiah funds account held by a Bank at Bank
Indonesia;
14. Bank ...
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14. Bank Indonesia-SBI Administration System, hereinafter referred to as BI-SPS,
is a system managed by Bank Indonesia for transaction settlement,
encompassing Fund Settlement and Securities Settlement, and registration of
ownership of SBIs;
15. Delivery Versus Payment, hereinafter referred to as DVP, is a mechanism for
transaction settlement by means of Securities Settlement conducted
simultaneously with Fund Settlement in the BI-SPS;
16. Free of Payment, hereinafter referred to as FoP, is a mechanism for transaction
settlement in which Securities Settlement is conducted within the BI-SPS
while Fund Settlement is conducted outside the BI-SPS;
17. Securities Settlement is transfer of securities ownership from the seller to the
buyer in the SBI Administration Account of each party in accordance with a
transfer order from the seller;
18. Fund Settlement is transfer of funds from the buyer to the seller of securities in
the Demand Deposit Account of each party in accordance with payment order
from the buyer;
19. Book Entry Register, hereinafter referred to as BER, is a system for scripless
registration of Securities ownership, conducted electronically in a journal;
20. Central Registry is the function performed by Bank Indonesia c.q. Money
Market Transaction Settlement Division—Directorate of Monetary
Management (PTPU-DPM), Jl. M.H. Thamrin No. 2, Jakarta 10110, for
registration of securities ownership using the BER for the account of Banks
and Sub-Registries;
21. Sub-Registry is the function performed by a Bank or non-Bank party
appointed by Bank Indonesia for registration of securities ownership using the
Book Entry Register (BER) for the account of non-bank customers
purchasing/selling SBIs;
22. Confirmation of Securities Registration, hereinafter referred to as KPS, is
proof of registration of SBI ownership issued by the Central Registry;
23. Statement ...
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23. Statement of Securities Secured as Collateral, hereinafter referred to as SKSD,
is proof of SBIs secured as collateral, issued by the Central Registry;
24. Bank Indonesia-Real Time Gross Settlement System, hereinafter referred to as
the BI-RTGS System, is an system for interbank electronic funds transfer in
the Rupiah currency with settlement conducted individually on a per
transaction basis in accordance with prevailing regulations.
II. ISSUANCE OF SBIs
A. Characteristics
1. SBIs have units of Rp 1,000,000 (one million rupiahs).
2. The terms of SBIs are 1 (one) month, 2 (two) months, 3 (three) months, 6
(six) months, and 12 (twelve) months, stated in number of days and
calculated from the transaction settlement date through the maturity date.
A sample calculation of SBI term is presented in Appendix 1.
3. The SBI discount is calculated according to the true discount formula as
follows:
Nominal Value x 360
Cash Value = ---------------------------------------------
360 + {(Discount Rate) x (Term)}
Discount Value = Nominal Value – Cash Value
SBI Discount Value shall be calculated as per the example in Appendix 2.
4. SBIs are issued in scripless form.
5. SBIs may be traded on the secondary market.
B. Principles and Requirements
1. SBIs are issued through an auction mechanism.
2. SBI auctions are conducted on the basis of quantity targets, taking into
account the interest/discount rates that are formed.
3. SBI ...
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3. SBI auctions are held every Wednesday, or on the following working day
or another working day if a Wednesday is a public holiday. If necessary,
Bank Indonesia may hold additional SBI auctions on other working days.
4. Concerning maturity date, it is stipulated that SBIs reach maturity on
Thursday or on the following working day if a Thursday is a public
holiday. If necessary, Bank Indonesia may stipulate maturity for another
working day.
5. Bank Indonesia shall announce the planned quantity target for the auction
comprising an indicative target no later than 1 (one) working day prior to
the day of SBI auction, using the ABS and/or Money Market Information
Center (PIPU) and/or other means as determined by Bank Indonesia.
6. The facility used for placing SBI bids is the ABS facility.
7. Parties eligible to participate in SBI auction, hereinafter referred to as
Bidders, may be differentiated by:
a. Principal Bidders, namely Banks and Brokers possessing ABS facilities
and conducting transactions in SBI auctions directly with Bank
Indonesia, subject to the following provisions:
1) Banks conduct transactions for their own account and/or for the
account of other Banks;
2) Brokers conduct transactions for the account of other parties
(Banks)
b. Subsidiary Bidders, namely Banks not possessing ABS facilities.
8. Principal Bidders are required to submit the names of not more than 3
(three) authorized dealers for conducting SBI auction transactions and the
User Unique Identification (UUID) for each of these authorized dealers to
the Money Market Operations Division (OPU), Directorate of Monetary
Management (DPM), Bank Indonesia, Jl. M.H. Thamrin No. 2, Jakarta
10110, using Form 1.a according to the specimen in Appendix 3-a.
9. In the event ...
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9. In the event of any change in authorized dealer and/or UUID as referred to
in number 8, the Principal Bidder shall report the change to the Money
Market Operations Division stating the names of 3 (three) authorized
dealers and their UUIDs using Form 1.b according to the specimen in
Appendix 3-b. This report shall be conveyed to Bank Indonesia no later
than 1 (one) working day prior to the time that the authorized dealer
concerned conducts transactions in SBI auction.
10. Principal Bidders are required to ensure the secure use of the UUID and
shall be fully responsible for SBI auction transactions submitted to Bank
Indonesia.
11. Prior to placing transactions in SBIs, Banks and Brokers are required to
sign a Statement as referred to in Appendix 4, stating that they are subject
to and bind themselves to all provisions enacted by Bank Indonesia in
regard to SBI transactions.
12. A party conducting SBI transactions is required to hold an SBI
Administration Account, subject to the following provisions:
a. A Bank functioning as a Sub-Registry is required to have two SBI
Administration Accounts at the Central Registry, one for transactions
for its own account and one for transactions for the account of other
parties (Sub-Registries);
b. A Bank not functioning as Sub-Registry is required to have one SBI
Administration Account at the Central Registry for transactions for its
own account;
c. A non-Bank party functioning as Sub-Registry is required to have one
SBI Administration Account at the Central Registry for transactions for
the account of other parties;
d. Other party is required to have an SBI Administration Account at a
Sub-Registry.
13. The procedure ...
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13. The procedure for opening an SBI Administration Account at the Central
Registry is stipulated in Roman numeral V item A, while the procedure for
opening an SBI Administration Account at a Sub-Registry shall be
stipulated by the respective Sub-Registry.
14. Banks are required to have sufficient balance in the Demand Deposit
Account for settlement of SBI transactions on the primary market, subject
to the following provisions:
a. A Bank placing a direct bid shall bear responsibility to the limit of total
SBIs for its own account; and
b. A Bank placing a bid through another Bank or Broker shall bear
responsibility for the total SBIs for which bids are placed for the
account of the Bank concerned.
15. Settlement of SBI Auction transactions on the primary market shall take
place on the working day after the day of the SBI auction (one-day
settlement).
C. Procedure for Auctioning of SBIs
1. On the day of the SBI Auction, Principal Bidders shall place their bids
with the Money Market Operations Division by means of the ABS facility,
during the hours of 10.00 through 14.00 hours Jakarta Time.
2. SBI bids as referred to in the above number 1 shall be placed by:
a. the Bank Head Office:
1) for a Bank having its head office in the working area of the Bank
Indonesia Head Office;
2) for a Bank having its head office in the working area of a Bank
Indonesia Regional Office, but not having a branch office in the
working area of the Bank Indonesia Head Office.
b. a Branch office of the Bank in the working area of the Bank Indonesia
Head Office, for a bank having its head office in the working area of a
Bank ...
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Bank Indonesia Regional Office. The Money Market Operations
Division shall be informed of the appointment of such Bank branch
office no later than 1 (one) working day prior to SBI transactions and
shall remain effective until a letter is issued for revocation of the
appointment.
c. a Broker.
3. A Bank not having an ABS may bid in SBI auction as a Subsidiary Bidder
by placing bids through a Principal Bidder as referred to in the above item
B.7.a. The Bank shall be required to send confirmation to the Money
Market Operations Division no later than 30 minutes after close of auction
through the Reuters Monitoring Dealing System (RMDS) or by telephone
confirmed by facsimile, using the form attached in Appendix 5.
4. A Bank or Broker placing a bid for the account of another party (Bank) is
required to submit a Detailed List of SBI Bids to the Money Market
Operations Division no later than 15 (fifteen) minutes after close of
auction, using the form attached in Appendix 7, by means of ABS
electronic mail (e-mail).
5. The scope of bids as referred to in number 1 covers quantity bids and
discount rate bids by maturity, subject to the following provisions:
a. quantity bids from each Bank and Broker shall be submitted in
amounts of no less than 1,000 (one thousand) units or Rp
1,000,000,000 (one billion rupiahs), and thereafter in increments of 100
(one hundred) units or Rp 100,000,000 (one hundred million rupiahs);
b. discount rate bids shall be submitted in increments of 0.0625% (six
hundred and twenty-five per million).
6. The Bank or Broker shall be responsible for the integrity of the data of any
SBI bids placed, and a Broker is prohibited from placing bids for its own
account.
7. Any SBI ...
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7. Any SBI Bidder having placed a bid is prohibited from withdrawing the
bid.
8. The winner of the SBI Auction shall be determined according to the
following provisions:
a. in the event that the discount rate is lower than the SOR, the Principal
Bidder concerned shall receive all SBI quantity bids placed;
b. in the event that the discount rate is equal to the SOR, the Principal
Bidder concerned may receive all SBI quantity bids placed or part of
the SBI quantity bids calculated on a pro-rata basis.
A sample calculation for determining the winner of the SBI auction is
presented in Appendix 6.
9. Bank Indonesia may adjust the quantity outcome of the SBI Auction or
cancel all quantity results from SBI Auction in the event that the SOR to
be formed from the outcome of SBI Auction pertaining to quantity targets
is outside the bounds of reasonability.
10. Bank Indonesia shall announce the result of the auction comprising the
overall quantity and weighted average discount rate of winning bids
through the ABS facility, the Money Market Information Center, or other
facility no later than 16.30 hours Jakarta Time on the day of the auction.
11. Bank Indonesia shall inform Principal Bidders winning the SBI auction of
the outcome of auction in terms of quantity and discount rate of SBIs,
using the ABS facility on the day of the auction.
12. The procedure for placement of SBI Auction bids through the ABS facility
shall conform to the mechanism set out in the ABS Standard Operating
Procedure (SOP) stipulated in Appendix 7.
III. SECONDARY ...
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III. SECONDARY MARKET TRADING OF SBIs
A. SBI-Repo Trading with Bank Indonesia
1. Principles Governing SBI-Repo Trading with Bank Indonesia
a. Bank Indonesia shall conduct SBI transactions under Repo only with
Banks.
b. SBIs that may be sold to Bank Indonesia under Repo are SBIs held by
the Bank concerned and having a remaining maturity of no less than 4
(four) days.
c. The total value of SBIs held by a Bank that may be sold to Bank
Indonesia under Repo shall not exceed 25% of the average quantity of
SBIs won by the Bank for its own account during the last 3 (three) SBI
auctions conducted by Bank Indonesia.
A sample calculation of SBIs that may be sold under Repo to Bank
Indonesia is presented in Appendix 8.
d. The term of Repo is 1 (one) working day.
e. The Repo discount rate is the highest value of:
1) weighted average interbank money market rate in the morning
session for 1 (one) day term at 1 (one) working day prior to the
transaction, plus 200 (two hundred) basis points; or
2) weighted average discount rate for 1 (one) month SBIs in the latest
auction, plus 200 (two hundred) basis points.
A sample calculation of the SBI-Repo discount rate is presented in
Appendix 8.
f. Settlement of SBI-Repo transactions shall be conducted on the day of
the SBI-Repo transaction (same-day settlement) using the DVP
mechanism.
8. A Bank ...
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g. A Bank bidding for an SBI-Repo transaction is required to have
sufficient balance in the SBI Trading Account for settlement of the
SBI-Repo transaction.
2. Procedure for SBI-Repo Transactions with Bank Indonesia
a. On the date of the SBI-Repo transaction, the Bank shall place a bid for
the SBI-Repo transaction with the Money Market Operations Division
through the RMDS or by telephone confirmed by facsimile, during the
hours of 15.00 through 16.00 hours Jakarta Time.
b. Bids for SBI-Repo transaction as referred to in the above letter a shall
be placed by:
1) the Bank Head Office:
a) for a Bank having its head office in the working area of the
Bank Indonesia Head Office;
b) for a Bank having its head office in the working area of a Bank
Indonesia Regional Office, but not having a branch office in the
working area of the Bank Indonesia Head Office.
2) Branch Office of the Bank in the working area of the Bank
Indonesia Head office, for a Bank having its head office in the
working area of a Bank Indonesia Regional Office as designated in
SBI auction transactions and effective until issuance of a letter
revoking such designation.
c. Application for SBI-Repo transaction by a Bank shall be subsequently
confirmed by delivery of Application for Transfer of Registration-Repo
(SPPR-Repo) no later than 17.30 hours local time, using form BER-13
according to the specimen in Appendix 21.
d. The SPPR-Repo as referred to in the above letter c shall be conveyed
to:
1) the Central Registry by:
a) the head ...
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a) the head office of a Bank having its head office in the working
area of the Bank Indonesia Head Office;
b) a branch office in the working area of the Bank Indonesia Head
Office, for a bank having its head office in the working area of
a Bank Indonesia Regional Office.
2) the Central Registry through the local Bank Indonesia Regional
Office, for a Bank having its head office in the working area of a
Bank Indonesia Regional Office and not having a branch office in
the working area of the Bank Indonesia Head Office.
e. In the event that the data in the SPPR-Repo form as referred to in letter
c is incomplete or contains errors, Bank Indonesia shall inform the
Bank of the matter for filling in of the missing information or
correction and thereafter to be resubmitted no later than 17.30 hours
local time. Any application for SBI-Repo transaction that is approved
but not accompanied by the required SPPR-Repo shall be declared
void.
f. Notification of approval or rejection of an SBI-Repo bid shall be
conveyed by the Bank to the Money Market Operations Division using
the RMDS facility or telephone confirmed by facsimile.
B. SBI-Repo and SBI-Outright Trading Conducted Between Banks/Sub-
Registries
1. The principles and procedures for SBI-Repo and SBI-Outright trading
conducted between Banks/Sub-Registries are left to the agreements made
by the parties to these transactions.
2. Settlement of SBI-Repo and SBI-Outright trading between Banks/Sub-
Registries may be conducted through Bank Indonesia.
IV. SBI ...
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IV. SBI ADMINISTRATION SYSTEM
Bank Indonesia shall administer SBIs using the BI-SPS, consisting of the system
for registration of SBI ownership and system for transaction settlement, itself
consisting of Payment Settlement and Securities Settlement, including repayment
of SBI principal.
A. Principles Governing Registration of SBI Ownership
1. Bank Indonesia shall administer SBI ownership through the BI-SPS,
whether for SBIs obtained through SBI transactions on the primary market
or SBI transactions on the secondary market encompassing SBI-Repo
transactions between Banks and Bank Indonesia, SBI-Repo transactions
between Banks/Sub-Registries, and SBI-Outright transactions between
Banks/Sub-Registries.
2. Registration of SBI ownership shall be performed by Bank Indonesia
according to the principle of the two-tier system, consisting of the Central
Registry and Sub-Registries, using the BER system.
3. SBI ownership at the Central Registry and Sub-Registries shall be recorded
in SBI Administration Accounts consisting of SBI Trading Accounts and
SBI Collateral Accounts.
4. Sub-Registries shall not be permitted to maintain SBI Administration
Accounts for their own account or for the account of the management,
shareholders, and Sub-Registry manager, including the management and
employees of the Sub-Registry manager.
5. Non-Bank customers purchasing SBIs on the secondary market, including
those conducting repo transactions, are required to have an SBI
Administration Account at a Sub-Registry. For a customer of a bank that
is not a Sub-Registry, the SBI Administration Account may be opened at
the Sub-Registry through the Bank concerned.
6. Sub-Registries ...
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6. Sub-Registries are required to inform non-bank customers holding SBI
Administration Accounts that the names recorded in the administration of
SBIs in the Sub-Registry are names of SBI holders.
7. Sub-Registries are required to record the names of SBI holders in the SBI
administration. In the event that an SBI holder is the customer of another
Bank, the name of the SBI holder may be recorded in the Sub-Registry by
stating the name of the Bank q.q. name of the SBI holder concerned.
B. Principles Governing SBI Transaction Settlement
1. The mechanism for SBI transaction settlement through the BI-SPS shall
operate on a per transaction basis (gross settlement), differentiated by DVP
and FoP.
2. Bank Indonesia shall conduct the SBI transaction settlement for SBI
