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Gemloc Advisory Services Survey

Key Priorities for Debt Market Development

June 2009

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Gemloc Advisory Services Survey – “Key Priorities for Debt Market Development” aims to capture a more refined map of TA demand through the survey questions that are organized along two dimensions: TA priority topics and types of TA. The views published should not be attributed to the World Bank or any affiliated organizations. Nor do any of the conclusions represent official policy of the World Bank or of its Executive Directors or the countries they represent.

1

Survey Rationale

Since the beginning of the decade, most emerging market economies (EMEs), including

all Gemloc countries, have made substantial progress in developing their debt markets

supported by capital inflows, financial sector reforms triggered by lessons learned after

the 1997 Asian crisis, and technical assistance from multilaterals focused on local

currency debt markets.

The new environment, with most EMEs at more advanced stages of debt market

development, has changed the nature and type of technical assistance (TA) demanded by

countries and requires a more sophisticated and focused approach. Features that are now

framing TA demand include:

Policy makers more often require support in addressing specific bottlenecks than

developing broad reform plans

TA needs have become more specialized but have widened in scope, given a broader

array of debt market institutions and participants (e.g., specialized regulators and

supervisors, debt management offices, infrastructure providers, primary dealers, etc.)

that have developed in recent years

Country TA needs have become more differentiated depending on issues such as size,

financial system structure, exchange rate policy, economic growth model (e.g.,

current account deficit/surplus)

Specific EME constraints (e.g., demand from state owned institutions, chronic excess

of liquidity, volatility of capital flows) involve finding new options to deal with

market development, including common approaches that differ substantially from

those adopted in advanced economies.

In this context, the Gemloc Advisory Services (AS) team designed the survey with a goal

of capturing a more refined map of TA demand. Survey questions were organized along

the following two dimensions:

1. TA Topics: Twenty specific topics for potential specialized TA classified under eight

standard areas of work1 covered by the World Bank and indicated by EMEs in

previous TA programs.2

2. Types of TA: Three types of TA (“product”): standard TA, technical training, and peer

country discussion. The latter, offered in a systematic fashion, would represent a new

type of TA.

1 Macro and micro interactions and trade-offs; primary markets; money markets; secondary markets;

derivatives markets; investor base; custody, clearance, and settlement; and debt market regulations

2 See World Bank, 2007: “Developing the Domestic Government Debt Market: from diagnostics to reform

implementation” and World Bank- IMF, 2001: “Developing Government Bond Markets: a Handbook”

2

Key Findings3

In addition to the above two dimensions (TA topics and types of TA), survey findings

were analyzed according to responding institutions and regions. Responding institutions

included ministries of finance (MoF), central banks (CB), and securities regulators

(“SEC”) – the main public sector stakeholders in debt market development. Regions were

grouped into Asia, EMEA (covering ECA, MENA, and Africa), and LAC.

In terms of topics, price dissemination and secondary market liquidity were considered

the most critical across all regions and surveyed institutions (3.5 average out of 4), as

well as of highest priority (3.3 average out of 4). This was followed by benchmark

building mechanisms in the primary market (3.2 average out of 4) and repo markets and

investor base diversification strategies (both with 3.1 average out of 4). All these topics

gravitate toward specific bottlenecks that need to be tackled to improve overall market

liquidity.

Clearing and settlement also ranked high in terms of criticality (3.2 average out of 4) and

priority (3.1 average out of 4), which is a sign of more developed and sophisticated

markets.

Importantly, these priority and critical areas show significant correlation with the GEMX

index, given that they represent 50% of the weight of the investability indicator

parameters (liquidity 25%, clearing and settlement 15%, and investor base 10%).4

In terms of product, respondents showed high demand for all three products, namely, out

of 875 replies, peer country dialogue (PCD), standard TA (STA) and technical training

(TT) received 47%, 31%, and 22%, respectively.

Product preference in the survey illustrates two key aspects in the demand for TA. First,

countries have selected products depending on the nature of the topic. For example, more

technical issues, such as valuation, repos, and price dissemination, were linked to TT or

STA. Second, issues that have been tackled in different degrees by most countries but

still exhibit bottlenecks (e.g. benchmark building) were linked to PCD. The latter also

reflects strong demand for support through cross-sharing or South-South assistance.

In terms of public sector stakeholders, there was consensus across all entities on the

criticality of secondary market liquidity (3.6 for MoF, 3.5 for SEC, and 3.3 for CB).

However, MoF showed a broader perspective, giving average criticality scores of 3.2 or

3 See Annex for detailed findings.

4 Other investability parameters include: capital control, convertibility and access (25%); regulatory quality

and creditor rights (15%); and taxation on bond investment (10%),

3

above to all topics in the survey, whereas SEC and CB were more focused, giving a

higher score to their main areas of responsibility. For example, SEC gave more weight to

regulation (3.4) and institutional organization of derivatives markets (3.3.); CB assigned

higher criticality to repo markets (3.2) and liquidity management for money market

efficiency (3.2).

Survey results show that MoF, SEC, and CB share several areas of interest, highlighting

the importance of close coordination and cooperation among the three institutions. While

TA counterparties vary from country to country, MoF seems better positioned to take a

leading role in debt market reforms, given its broader perspective of the links between

different issues.

In terms of regions, secondary market liquidity was the most critical topic for all regions

(3.6 in Asia, 3.5 in EMEA, and 3.4 in LAC), but there were marked differences in the

other topics depending on the region. Asia included as critical topics enforcement

capabilities of regulation (3.5), diversification of investor base (3.2), and institutional

organization of derivatives markets (3.2). EMEA countries assigned a high criticality

score to primary market mechanisms for benchmark building (3.5) and clearing and

settlement (3.5). LAC countries selected as critical topics repo markets (3.4), benchmark

building (3.4), and interactions between cash and derivatives markets (3.4).

Survey results grouped by region reflect differences in development strategies within

each region. However, these results need to be taken with caution given the diversity of

size and degree of development among countries within each region, particularly in

EMEA, which includes the broadest variety of countries from ECA, MENA and Africa.

Conclusions

Survey results show that there is strong TA demand for different aspects of debt market

development and that country counterparties have a clear idea of critical and priority

areas that need to be addressed to advance market development. The survey has also

served as a useful tool to map out TA demand, so that it can be organized according to

specific country needs, and to identify and take advantage of potential synergies across

countries and institutions.

Gemloc AS work conducted in FY 2008/09 was in line with survey findings on three

fronts. First, reform action plans developed for Egypt and Nigeria, after discussions with

their respective authorities, established as high priorities primary market mechanisms for

benchmark building, repos, price dissemination, and clearing and settlement, which are

consistent with the survey results.

4

Second, a pilot Peer Group Dialogue (PDG) was conducted in March 2009 with nine

Gemloc countries on the financial crisis impact on debt markets and resulting policy

responses. The discussion proved to be a useful exercise and the same format will be used

for further policy and technical discussions on various issues identified by Gemloc

countries.

Third, three handbooks have been planned on three priority areas identified by Gemloc

countries: primary dealers and benchmark building, repo markets, and clearing and

settlement. The handbooks will focus on key issues that need to be addressed in each

topic, drawing from best practices and EME experiences as well as from recent TA

conducted in these areas. Final drafts are expected to be produced by the end of 2009.

5

Gemloc Survey Annex March 2009

Gemloc Team5

Annex 1

1. About the Survey

1.1. The purpose of the survey was to create a demand-driven TA, in particular on the topics and

types of TA that countries desire, to be used as an indicative input to support a more effective

planning of the technical assistance work for the development of local currency bond markets

(See Euromoney 2008/20096 for more details on this topic).

1.2. Survey methodology: Surveys were distributed to relevant authorities (MoF, SEC, CB) in all

countries that are expected to participate in Gemloc. Topics of the questions ranged from

macro/micro, to market development (money, primary, secondary, and derivatives markets), and

to others (investor, infrastructure, and regulatory) (See Table 1). On these topics, country

authorities were asked to identify the critical areas, by marking from “very important” (indicated

as 4) to “not important at all” (indicated as 1); and the priority areas, by marking from “very

relevant” (indicated as 4) to secondary, etc. (See Table 2). Additionally, they responded on their

desired TA approach, indicated “PCD” for peer-country dialogue, “STA” for specific technical

assistance, and/or “TT” for technical training (See Table 3). Finally, authorities were asked

whether there were other ongoing funding or technical resources related to the topic.

Table 1: Survey Topics

Topics Sub-topics

1. Macro and Micro

interactions and trade-

offs

1.1. Capital controls and currency convertibility

1.2. Options for excess liquidity sterilization

1.3. Market taxation structure and financial neutrality

2. Primary Markets 2.1. Debt management strategy

2.2. Organization of primary market and issuance mechanisms

(benchmark building)

3. Money Markets 3.1. Overall price dissemination and liquidity

3.2. Repo markets

3.3. Operational liquidity management for money markets efficiency

4. Secondary Markets

4.1. Price dissemination and liquidity

4.2. Trading and institutional organization

4.3. Valuation schemes

5. Derivatives Markets 5.1. Sequence and interactions between cash and derivatives markets

5.2. Exchange and OTC markets

6. Investor base 6.1. Strategies for diversification

5 The Gemloc Team thanks the World Bank Regions, Treasury, and consultants (Baudouin Richard, Patrick

van der Wansem, Pedro Elosegui, and Catiana Garcia Kilroy) for their great help in collecting the survey.

For any inquiries on the survey, please contact Anderson Caputo Silva ([email protected]) and

Yoshiko Saito ([email protected]). 6 Silva, A. and Garcia-Kilroy, C (2008). “The Development of Deeper and more Liquid Local Currency

Bond Markets.” The Euromoney Emerging Markets Handbook 2008/09.

mailto:[email protected]

mailto:[email protected]

6

Topics Sub-topics

6.2. Prudential regulations

7. Custody, Clearance,

and Settlement

7.1. Local and International Central Securities Depositories (CSD)

7.2. Risk management upgrades

8. Regulations for Debt

Markets

8.1. Systemic risk

8.2. Investor protection

8.3. Enforcement capabilities

Table 2: Questions per the Survey Topics

1. Critical areas for your

local currency development

2. Ranking the areas of

work by priority

3. Type of product

desired

4. Area covered

by other TA

program

1 – 4 (4 as most critical) 1 – 4 (4 as highest

priority*)

PCD, STA, and/or TT

Note: *Reversed (1 as highest priority) in the actual survey collected for convenience.

7

Table 3: Types of Product Desired

Peer-Country Dialogue

(PCD)

This product is conceived as a specialized and tailored discussion

workshop and panel formed by a reduced number of high-level officials

from countries with similar reform areas of interests guided by experts in

the area. The purpose is to facilitate exchange of insights and ideas based

on country experiences that can be used by policy makers as reference

framework for their own reform strategy or the design of particular reform

projects.

Specific Technical

Assistance (STA)

This product is country specific and builds on a well established technical

assistance program consisting of 1) working with clients to develop a road

map for debt market reforms based on international best practices and

tailored to the country’s specific needs and 2) advising and supporting

clients in implementing reforms and assuring the quality of outcomes.

Technical training (TT) Capacity building is key to ensure quality assurance over the

implementation phase and for sustainability of reforms that are

implemented. Technical training is conducted through training workshops,

which address different layers of decision making and topic areas.

Background study material is produced for each workshop under the form

of technical notes, reform guidelines and presentations.

1.3. Collection Status: Surveys were collected in May 2008, followed by another in September 2008

for the countries that had yet to respond (both in view for the period April 2008/2009, prior to the

crisis). In total, 24 countries/48 institutions responded (See Table 4). Results were shared at the

May 2008 Gemloc conference among the participating countries and at Gemloc’s semi-annual

Advisory Board (October 2008).

Table 4: Countries and Authorities that Responded to the Survey

Note: Phase I countries are in bold.

EMEAASIA LAC

Kenya SEC

Nigeria MoF SEC CB

South Africa MoF SEC CB

Egypt, Arab Rep. MoF SEC

Morocco MoF SEC

Tunisia MoF SEC

India MoF SEC

Pakistan SEC

Sri Lanka SEC

Poland MoF

Turkey MoF

Argentina CB

Brazil MoF SEC CB

Chile MoF

Colombia MoF SEC CB

Costa Rica MoF SEC CB

Mexico MoF SEC CB

Peru MoF

China n/m SEC CB

Indonesia MoF SEC CB

Malaysia SEC CB

Philippines MoF

Thailand MoF SEC CB

Vietnam MoF SEC CB

8

2. Results: Critical and Priority Areas

2.1. The overall result (simple average, weighted by country) by the larger topic shows that the most

critical area was the “secondary markets” (3.5 points, out of total of 4), followed by the “primary

markets” (3.3 points) and “regulatory” (3.2 points). The topic on secondary market equally

received the highest interest across different authorities, size of markets, and regions, while there

were also some variations among the different groupings (See Chart 3).

Chart 1: Critical Areas (See Annex 2 for further details)

2.9

3.3

3.1

3.5

3.0 3.1 3.2 3.2

2.0

3.0

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5. Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas Average (3.2)

Notes: Figures are based on the sub-topic that received the highest average score under each

category. Figures are averaged out for countries with more than one authority responding.

Chart 2: Priority Areas

In terms of priority areas, secondary markets were indeed the highest, followed by investor base.

Priority seemed to be high, especially for basic areas needed in the earlier stages of development.

THIRD STAGE

5. Derivatives Markets (2.9)

3. Money Markets (2.9)

1. Macro/Micro (2.6)

SECOND STAGE

7. Clearance and Settlement (3.1)

2. Primary Markets (3.1)

8. Regulatory (2.9)

FIRST STAGE

4. Secondary Markets (3.3)

6. Investor Base (3.3)

9

Chart 3: Critical Areas by Different Authorities, Market Size, and Regions (See Annex 2 for further details)

2.1.1. By authorities:

All authorities

considered “secondary

markets” as one of the

most critical areas.

Other topics were

dispersed.

3.2

3.63.5 3.6

3.23.3 3.3

3.2

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (MoF) Average (3.4)

2.6

3.5

2.7

3.5

3.33.0

3.33.4

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (SEC) Average (3.2)

3.0 3.0

3.3 3.3

3.1

2.6

2.9 2.9

2.5

3.0

3.5

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (CB) Average (3.1)

2.1.2. By size:

Market size is based on

two groupings of the 24

countries that

responded (source:

Crisil, as of May 27,

2009).

Both big and small

bond markets


markets” and also

“primary markets” as

the most critical areas.

Large markets also

considered

“derivatives” a critical

area, while small

markets thought of

“regulatory” as critical.

3.0

3.5

3.2

3.5 3.5

2.9

3.33.1

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (Big Market) Average (3.3)

2.7

3.22.9

3.5

2.5

3.23.0

3.3

2.0

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (Small Market) Average (3.1)

10

2.1.3. By region:

For all regions,

“secondary markets”

was the most critical

area, followed by

“primary markets” for

LAC and closely for

EMEA. Asia

considered “regulatory”

as important, while

EMEA thought of

“clearance and

settlement” and LAC

also of “money



2.8

3.1 3.1

3.6

3.2 3.23.0

3.5

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (ASIA) Average (3.2)

3.1

3.5

2.8

3.5

2.5

2.9

3.53.2

2.0

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (EMEA) Average (3.2)

2.7

3.4 3.4 3.4 3.43.1 3.0

3.2

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (LAC) Average (3.3)

2.1.4. By authorities:

All authorities




Other topics were

dispersed.

3.2

3.63.5 3.6

3.23.3 3.3

3.2

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (MoF) Average (3.4)

2.6

3.5

2.7

3.5

3.33.0

3.33.4

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (SEC) Average (3.2)

3.0 3.0

3.3 3.3

3.1

2.6

2.9 2.9

2.5

3.0

3.5

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (CB) Average (3.1)

11

2.1.5. By size:

Market size is based on

two groupings of the 24

countries that

responded (source:

Crisil, as of May 27,

2009).

Both big and small

bond markets


markets” and also

“primary markets” as

the most critical areas.

Large markets also

considered

“derivatives” a critical

area, while small

markets thought of

“regulatory” as critical.

3.0

3.5

3.2

3.5 3.5

2.9

3.33.1

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (Big Market) Average (3.3)

2.7

3.22.9

3.5

2.5

3.23.0

3.3

2.0

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (Small Market) Average (3.1)

2.1.6. By region:

For all regions,

“secondary markets”

was the most critical

area, followed by

“primary markets” for

LAC and closely for

EMEA. Asia

considered “regulatory”

as important, while

EMEA thought of

“clearance and

settlement” and LAC

also of “money



2.8

3.1 3.1

3.6

3.2 3.23.0

3.5

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (ASIA) Average (3.2)

3.1

3.5

2.8

3.5

2.5

2.9

3.53.2

2.0

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (EMEA) Average (3.2)

2.7

3.4 3.4 3.4 3.43.1 3.0

3.2

2.5

3.0

3.5

4.0

1.

Macro/Micro

2. Primary

Markets

3. Money

Markets

4. Secondary

Markets

5.

Derivatives

Markets

6. Investor

base

7. Clearance

and

Settlement

8. Regulatory

Critical Areas (LAC) Average (3.3)

2.2. Results by sub-topic: A direct comparison of critical areas and priority areas show that critical and

priority topics may be equally high and overlap in some areas, but may not necessarily overlap for

others. Highly critical areas with equally high priority given were 4.1. Price dissemination and

liquidity and 2.2. Organization of primary market and issuance mechanisms (benchmark building).

Highly critical areas with less priority were 4.3 valuation schemes and 8.3 enforcement

capabilities.

12

Chart 4: Critical Areas and Priority Areas: Overall Comparison

Table 5: Critical Areas and Priority Areas: Comparison of Top 10 Topics

Top 10 Critical Areas Top 10 Priority Areas

Category Sub Category Score Category Sub Category Score

4. Secondary Markets 4.1. Price dissemination and liquidity 3.5 4. Secondary Markets 4.1. Price dissemination and liquidity 3.3

2. Primary Markets 2.2. Organization of primary market and

issuance mechanisms (benchmark building)

3.3 6. Investor base 6.1. Strategies for diversification 3.3

4. Secondary Markets 4.2. Trading and institutional organization 3.2 7. Custody,

Clearance, and

Settlement

7.1. Local and International Central

Securities Depositories (CSD)

3.1

4. Secondary Markets 4.3. Valuation schemes 3.2 5. Derivatives Markets 5.1. Interactions between cash and

derivatives markets and development

sequence

3.1

8. Regulations for

Debt Markets

8.2. Investor protection 3.2 2. Primary Markets 2.2. Organization of primary market and


3.1

7. Custody,

Clearance, and

Settlement



3.2 2. Primary Markets 2.1. Debt management strategy 3.0

2. Primary Markets 2.1. Debt management strategy 3.1 6. Investor base 6.2. Prudential regulations 3.0

8. Regulations for

Debt Markets

8.3. Enforcement capabilities 3.1 7. Custody,

Clearance, and

Settlement

7.2. Risk management upgrades 3.0

6. Investor base 6.1. Strategies for diversification 3.1 8. Regulations for

Debt Markets

8.2. Investor protection 2.9

3. Money Markets 3.2. Repo markets 3.1 4. Secondary Markets 4.2. Trading and institutional organization 2.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0



1.3. Market taxation structure and financial

neutrality

2.1. Debt management strategy

2.2. Organization of primary market and issuance

mechanisms (benchmark building)

3.1. Overall price dissemination and liquidity

3.2. Repo markets

3.3. Operational liquidity management for MM

efficiency




5.1. Interactions between cash and derivatives

markets and development sequence


6.1. Strategies for diversification


7.1. Local and International Central Securities

Depositories (CSD)


8.1. Systemic risk



Critical Areas Priority Areas

13

2.2.1. Results by sub-topic: by authority, size, and region

Chart 5: Critical Areas: Comparison By Authority

Table 6: Critical Areas and Priority Areas: Comparison of Top 5 Topics, By Authority MoF SEC CB

Score Score Score

Critical Priority Critical Priority Critical Priority

2. Primary

Markets

2.1. Debt management

strategy

3.6 3.4 4. Secondary

Markets

4.1. Price dissemination

and liquidity

3.5 3.2 3. Money

Markets

3.1. Overall price

dissemination and

liquidity

3.3 2.9

4. Secondary

Markets


and liquidity

3.6 3.2 2. Primary

Markets

2.2. Organization of

primary market and

issuance mechanisms



Markets


and liquidity

3.3 3.6

3. Money

Markets

3.2. Repo markets 3.5 3.5 8.

Regulations

for Debt

Markets

8.2. Investor protection 3.4 3.3 3. Money

Markets

3.2. Repo markets 3.2 3.1

2. Primary

Markets


primary market and

issuance mechanisms


3.4 2.9 7. Custody,

Clearance,

and

Settlement

7.1. Local and

International Central

Securities Depositories

(CSD)

3.3 3.0 3. Money

Markets

3.3. Operational liquidity

management for MM

efficiency

3.2 3.4

4. Secondary

Markets

4.2. Trading and

institutional organization

3.4 3.1 5. Derivatives

Markets

5.2. Exchange and OTC

markets

3.3 3.1 5. Derivatives

Markets

5.2. Exchange and OTC

markets

3.1 3.0

Category Sub CategorySub CategoryCategory Category Sub Category

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1.1. Capital controls and currency

convertibility



neutrality


2.2. Organization of primary market and



3.2. Repo markets


efficiency










Depositories (CSD)


8.1. Systemic risk



MoF SEC CB

14

Chart 6: Critical Areas: Comparison By Market Size

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0




neutrality





3.2. Repo markets


efficiency










Depositories (CSD)


8.1. Systemic risk



Big Small

Table 7: Critical Areas and Priority Areas: Comparison of Top 5 Topics, By Market Size

Developed Bond Market Less Developed Bond Market

Score Score

Critical Priority Priority Critical

4. Secondary

Markets

4.1. Price dissemination and liquidity 3.5 3.2 4. Secondary Markets 4.1. Price dissemination and liquidity 3.5 3.0

2. Primary Markets 2.2. Organization of primary market and


3.5 3.4 8. Regulations for

Debt Markets

8.2. Investor protection 3.3 3.0

2. Primary Markets 2.1. Debt management strategy 3.5 2.7 6. Investor base 6.1. Strategies for diversification 3.2 2.9

5. Derivatives

Markets

5.1. Interactions between cash and

derivatives markets and development

sequence

3.5 3.3 2. Primary Markets 2.2. Organization of primary market and


3.2 2.9

5. Derivatives

Markets

5.2. Exchange and OTC markets 3.4 3.1 4. Secondary Markets 4.2. Trading and institutional organization 3.1 2.7

4. Secondary

Markets

4.3. Valuation schemes 3.3 2.7 8. Regulations for

Debt Markets

8.3. Enforcement capabilities 3.1 2.6

7. Custody,

Clearance, and

Settlement



3.3 3.0 4. Secondary Markets 4.3. Valuation schemes 3.0 2.2

4. Secondary

Markets

4.2. Trading and institutional organization 3.3 2.9 7. Custody,

Clearance, and

Settlement



3.0 3.1

3. Money Markets 3.2. Repo markets 3.2 2.6 6. Investor base 6.2. Prudential regulations 3.0 2.8

8. Regulations for

Debt Markets

8.1. Systemic risk 3.1 2.7 7. Custody,

Clearance, and

Settlement

7.2. Risk management upgrades 3.0 2.9

Sub CategoryCategory Category Sub Category

15

Chart 7: Critical Areas: Comparison By Region

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0




neutrality





3.2. Repo markets


efficiency










Depositories (CSD)


8.1. Systemic risk



Asia EMEA LAC

Table 8: Critical Areas and Priority Areas: Comparison of Top 5 Topics, By Region

Asia EMEA LAC

Score Score Score

Critical Priority Critical Priority Critical Priority

4. Secondary

Markets


and liquidity


Markets


and liquidity

3.5 3.0 2. Primary

Markets


primary market and

issuance mechanisms


3.4 2.7

8.

Regulations

for Debt

Markets

8.3. Enforcement

capabilities

3.5 2.9 7. Custody,

Clearance,

and

Settlement

7.1. Local and

International Central

Securities Depositories

(CSD)

3.5 3.1 3. Money

Markets

3.2. Repo markets 3.4 3.3

8.

Regulations

for Debt

Markets

8.2. Investor protection 3.3 3.3 2. Primary

Markets


primary market and

issuance mechanisms



Markets

4.3. Valuation schemes 3.4 2.8

4. Secondary

Markets

4.2. Trading and

institutional organization

3.3 2.9 2. Primary

Markets


strategy

3.4 3.1 2. Primary

Markets


strategy

3.4 2.8

6. Investor

base

6.1. Strategies for

diversification

3.2 2.8 8.

Regulations

for Debt

Markets

8.1. Systemic risk 3.2 2.9 3. Money

Markets

3.1. Overall price

dissemination and

liquidity

3.4 3.0

Category Sub CategorySub CategoryCategory Category Sub Category

16

3. Result of TA Approach Desired and Other Ongoing Work

3.1. Types of services requested

Peer-country group panel analysis dialogue (PCD) received the highest requests, followed by direct

specific assessment and technical assistance (STA) and technical training (TT). MoF requested the

most number of PCDs out of the three authorities, while MoF in general largely requested for more

technical assistance than the others as well. Big markets have requested less PCDs compared with

small markets, while requesting more TT and STA on a relative scale. Asia had the highest requests

for TT, while LAC had the largest PCD and STA requests.

Chart 8: Types of Advisory Services Requested

3.1.1. Total

409

195

271

0

100

200

300

400

500

Total

PCD TT STA

3.1.2. By Authority

11.6

7.1

10.4

5.64.2

5.0

7.1 7.3

3.8

0.0

5.0

10.0

15.0

MoF SEC CB

PCD TT STA

3.1.3. By Size

7.7

11.3

5.74.3

7.7

5.3

0.0

5.0

10.0

15.0

Big Mkt Small Mkt

PCD TT STA

3.1.4. Bt Size By Region

9.6

7.6

12.0

6.14.3 4.14.4

6.5

9.0

0.0

5.0

10.0

15.0

Asia EMEA LAC

PCD TT STA

Note: Figure for “Total” represent the total number requests collected from the 48 surveys and all sub-topics, while the figure for each groupings represent the average number of requests collected

from each survey on all sub-topics.

17

3.2. Preferred Areas for Advisory Services, by Types of Product

Table 9: Areas for Advisory Services, by Types of Product

Type of Product Sub Category No of Authorities

1.1. Capital controls,currency convertibility 24

7.1. Local,International Central Securities Depositories (CSD) 23

1.2. Options for excess liquidity sterilization 22

1.3. Market taxation structure,financial neutrality 22

2.2. Organization of primary market,issuance mechanisms (benchmark

building)

22

6.1. Strategies for diversification 22

4.3. Valuation schemes 20

3.2. Repo markets 15

5.1. Interactions between cash,derivatives markets,development sequence 15

7.1. Local,International Central Securities Depositories (CSD) 18

4.1. Price dissemination,liquidity 17

4.2. Trading,institutional organization 16

5.2. Exchange,OTC markets 16

STA (Country specific TA)

TT (Technical training)

PCD (Peer-country dialogue)

Notes: Identified based on the frequency asked, out of the 48 authorities that responded. Of the top 10

critical areas, the blue arrow shows those that were top 5, and the orange shows those that were top

10.

To

p 1

0 C

ritical A

rea

s

18

4. Further Analysis and Next Steps

There were some potential sample biases for the survey responses (See Chart 9). For example, Asia

constituted of more big markets that responded, where as EMEA had more small markets respond.

Similarly, Asia had more SECs respond, where as EMEA had more MoF responses. Also, CB

representation was smaller among the small markets and in particular in the EMEA region.

As the sample is not perfectly distributed among the authorities, sizes, and regions, it is very important

to look at per country situation and keep this as indicative information to be used most effectively to

lead to a detailed discussion with policymakers. The Gemloc team hopes to utilize this survey to

initiate, or further discussions with designated counterparties on technical assistance, and among

others, initiate the peer-country dialogue among similarly developed markets.

Chart 9: Survey Response Samples

Note: Colombia submitted one survey for the three authorities but is counted as three authorities in the above breakdown.

Market SizeEntities Region

SEC (18)

38%

MoF (18)

37%

CB (12)

25%

Big Mkt

(27) 56%

Small Mkt

(21) 44%

EMEA (15)

31%

Asia (18)

38%

LAC (15)

31%

Region / SizeEntities / Size

13

5

7

5

10

6

0% 20% 40% 60% 80% 100%

Asia

EMEA

LAC

Big Small

Region / Entities

5

7

6

8

6

4

5

2

5

0% 20% 40% 60% 80% 100%

Asia

EMEA

LAC

MoF SEC CB

10

8

7

8

9

4

0% 20% 40% 60% 80% 100%

MoF

SEC

CB

Big Small

19

Annex 2 The following shows background figures for Chart 1 and Chart 3. Figures in the charts were based on

the sub-topic that received the highest average score under each category. Figures were averaged out

for countries with more than one authority responding.

Table 10: Critical Areas (Overall)

Critical Areas

Category Max Avg Ranking Detailed Category

1. Macro/Micro 2.9 3.2 16 1.3. Market taxation structure and financial neutrality

2. Primary Markets 3.3 3.2 2 2.2. Organization of primary market and issuance mechanisms (benchmark building)

3. Money Markets 3.1 3.2 10 3.2. Repo markets

4. Secondary Markets 3.5 3.2 1 4.1. Price dissemination and liquidity

5. Derivatives Markets 3.0 3.2 11 5.2. Exchange and OTC markets

6. Investor base 3.1 3.2 9 6.1. Strategies for diversification

7. Clearance and Settlement 3.2 3.2 6 7.1. Local and International Central Securities Depositories (CSD)

8. Regulatory 3.2 3.2 5 8.2. Investor protection

Table 11: Critical Areas (By Entity)

Critical Areas (MoF)



2. Primary Markets 3.6 3.4 1 2.1. Debt management strategy



5. Derivatives Markets 3.2 3.4 8 5.1. Interactions between cash and derivatives markets and development sequence



8. Regulatory 3.2 3.4 9 8.1. Systemic risk

Average (3.4) 3.4

Critical Areas (SEC)







6. Investor base 3.0 3.2 11 6.2. Prudential regulations



Average (3.2) 3.2

Critical Areas (CB)


1. Macro/Micro 3.0 3.1 6 1.2. Options for excess liquidity sterilization


3. Money Markets 3.3 3.1 1 3.1. Overall price dissemination and liquidity






20

Table 12: Critical Areas (By Market Size)










Average (3.3) 3.3

Critical Areas (Small Market)










Table 13: Critical Areas (By Region)

Critical Areas (ASIA)








7. Clearance and Settlement 3.0 3.2 12 7.2. Risk management upgrades

8. Regulatory 3.5 3.2 2 8.3. Enforcement capabilities

Average (3.2) 3.2

Critical Areas (EMEA)










Average (3.2) 3.2

Critical Areas (LAC)


1. Macro/Micro 2.7 3.3 18 1.1. Capital controls and currency convertibility



4. Secondary Markets 3.4 3.3 1 4.3. Valuation schemes





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