Financial regulators are working to expand the market for repo using government securities like Treasury bonds and bills as underlying instruments, with a plan to allow fund managers and trust entities—not just banks—to execute such transactions, reports the Inquirer.net.
Mari Toni Bautista, president of the National Association of Securities Broker Salesmen (Nasbi), said trust entities are now in talks with the Bureau of Internal Revenue (BIR) to exempt them from paying documentary stamp tax when participating in repo transactions, something that incumbent players currently enjoy.
Nasbi is organized by the Bankers Association of the Philippines (BAP) with the help of other groups like the Money Market Association of the Philippines, a private organization of bank treasurers and traders that led the development of the local repo market when it was revived in late 2017.
At present, Bautista said there are seven to 10 banks — also known as government securities eligible dealers (GSED) — that can do repo transactions. Trading of this product was initially limited to these GSEDs “to test the waters,” she explained.
By allowing more repo players, the Bangko Sentral ng Pilipinas (BSP) and Bankers Association of the Philippines (BAP) hope to increase trading volume, which could eventually provide another alternative benchmark that can be used as a guide for short term loan rates.