Regulation (NAP) - Regulation on the Issuance and Trading of Treasury Bills

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	1/10

Subject: Regulation on the Issuance and Trading of Treasury Bills

Considering the importance of Treasury Bills (TBs) for liquidity management and financing the State's treasury deficit, as well as the diversification of savings investment options for economic agents;

It being necessary to adopt specific rules on the issuance and placement of Treasury Bills, enabling the implementation of this monetary and fiscal policy instrument; Thus, in regulation of Decree-Law 2/2014 on the legal regime of Treasury Bills, and in the exercise of the competence attributed to it by letters b) and i) of Article 41 of its Organic Law, the BCSTP determines:

CHAPTER I
GENERAL PROVISIONS

Article 1.
(Object)

This instrument aims to regulate the specific conditions for the issuance, placement, and trading of Treasury Bills in the market.

Article 2.
(Competence)

1. It is incumbent upon the Central Bank:
   a) Manage the issuance and trading process of Treasury Bills, in observance of market rules and monetary policy principles; b) Define access conditions and criteria for selection and evaluation of proposals; c) Ensure the proper functioning of markets where Treasury Bills are traded;

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	2/10

a) Sanction practices that violate the regulatory rules on the matter, as provided in Article 23 of NAP 18/2014 on Open Market Operations.

Article 3.
(Definition)

For the purposes of this NAP, the following shall be understood as:

a) Treasury Bills - dematerialized securities, redeemable at terms not exceeding one year, denominated in national currency and issued by the State of São Tomé and Príncipe; b) Dematerialized security - a security without physical representation; c) Execution Order - a document issued by the BCSTP indicating the nominal value, interest rate, and maturity date applicable to acquired Treasury Bills. d) Primary Market for Treasury Bills - the market where Treasury Bills are issued, i.e., where securities are sold to their initial holders; e) Secondary Market for Treasury Bills - the market for the definitive or temporary purchase and sale of Treasury Bills already issued in the primary market. f) Placement - occurs when the BCSTP receives subscription proposals for TBs and, according to the selected auction type, proceeds with their distribution. g) Issuance - occurs when the BCSTP registers the subscribed amounts in the name of purchasing institutions, through inscription in their respective securities accounts and issues and delivers to each purchasing institution execution orders. The issuance date may coincide with the settlement date. h) Settlement - occurs when the subscribed amounts are debited from the current deposit accounts opened at the BCSTP in the name of the acquiring institutions.

Article 4.
(Nominal Value and Term)

1. The minimum nominal value of each Treasury Bill is STD 1,000,000 (one million) Dobras.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
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PPEEF	19/06/2015	19/06/2015	14/2015	3/10

2. The term of Treasury Bills must not exceed one year.
3. When the maturity date does not coincide with a business day, the business day immediately preceding that date shall be considered.

CHAPTER II
PRIMARY MARKET

Article 5.
(Access Conditions)

Credit institutions participating in the MMI have access to the primary market for Treasury Bills.

Article 6.
(Announcement and Placement Conditions)

1. The announcement of the placement conditions for Treasury Bills is made by letter, electronic means, or other communication method adopted by the BCSTP, indicating the placement and issuance date, fixed or indicative amount, and term.
2. The placement date may coincide with or precede, by one or more business days, the settlement date.
3. The placement session may be announced on the same day or with one to five business days' advance notice, mentioning the placement, submission of proposals, and settlement date, as well as the conditions of the Treasury Bills.
4. The placement of Treasury Bills shall be by interest rate auction or at a pre-fixed interest rate.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	4/10

Article 7.
(Subscription of Purchase Proposals)

1. The placement of Treasury Bills is based on purchase proposals submitted by financial institutions.
2. Purchase proposals for Treasury Bills must be submitted to the Directorate of Markets and Liquidity Management of the BCSTP using the forms in the annex, on the day of the placement session, until the announced closing time, in sealed and initialed envelopes indicating the issuance to which the proposal relates, via electronic means.
3. For each type of Treasury Bill, according to term, each institution may submit up to 6 purchase proposals indicating the rate, expressed in percentage points and rounded to the hundredth of a percentage point, and the desired amount, provided that the sum of the proposals does not exceed the amount of each issuance.
4. The amount of Treasury Bills to be subscribed shall be expressed in multiples of 1 billion Dobras.

Article 8.
(Discount)

Treasury Bills are placed at a discount, with the transaction value determined in accordance with Annex 1.

Article 9.
(Proposal Selection Criteria)

The selection of proposals must comply with the criteria established in NAP 018/2014 - Open Market Operations.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	5/10

Article 10.
(Communication of Information Regarding Acquired Securities)

1. The BCSTP shall transmit, by letter or electronic means, to each purchasing entity the nominal value and the net amount after discount applicable to the Treasury Bills allocated to them, as well as the weighted average rate of the proposal amounts.
2. On the issuance date, the BCSTP shall issue and deliver to each entity an Execution Order indicating the nominal value, interest rate, term, and maturity date applicable to the acquired Treasury Bills.
3. On the issuance date, the net amount of the acquired Treasury Bills shall be credited to the State by debiting the current deposit accounts of the acquiring institutions, opened in their name at the BCSTP.

Article 11.
(Reimbursement)

1. The reimbursement of Treasury Bills shall be carried out by the BCSTP, acting on its own behalf or on behalf of the State, depending on whether they were issued for monetary policy purposes or for treasury financing;
2. The reimbursed amounts shall be credited, upon notice, to the current deposit accounts of institutions holding Treasury Bills, on their respective maturity dates.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	6/10

Article 12.
(Early Reimbursement)

The Treasury may exercise the right to early reimbursement of the nominal value of TBs in its possession, for which it must communicate this intention to the BCSTP at least ten business days in advance, paying accrued interest and a commission of 15% on the foregone interest.

CHAPTER III
SECONDARY MARKET

Article 13.
(Transactions)

1. Entities with access to the primary market for Treasury Bills may conduct definitive or temporary purchase or sale operations of Treasury Bills among themselves or with the BCSTP.
2. The operations must be communicated by the participating entities to the BCSTP by 16:30 on the date on which the corresponding debit and credit movements must be carried out in their respective current deposit accounts at the BCSTP.
3. Based on the communications, the BCSTP shall update the securities accounts and debit and credit the current deposit accounts of the respective institutions and issue execution orders, cancelling the previous ownership records in the name of the transferring entities.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	7/10

Article 14.
(Transactions with the Public)

1. Treasury Bills acquired by institutions with access to the primary market may be placed with the public, by opening securities accounts in the name of their clients.
2. For this purpose, transactions with the public are those not conducted exclusively between entities with access to the primary market.
3. Institutions may agree with their clients to repurchase Treasury Bills on a date prior to their maturity.
4. Institutions that have sold Treasury Bills under the preceding paragraph shall reimburse them on the maturity date of these bills or on the date possibly established in the repurchase agreement.
5. Treasury Bills may be sold by their holders to institutions with access to the primary market or to third parties through these same institutions.

Article 15.
(Transitional Provisions)

In the absence of an IT platform, participating institutions must send communications via a letter addressed to the Directorate of Markets and Liquidity Management, attaching a copy of the Purchase Proposal, as per Annex II.

Article 16.
(Amendments to this NAP)

All amendments to this NAP are approved by the BCSTP, on its own initiative or upon proposal by Authorized Institutions.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	8/10

Article 17.
(Doubts and Omissions)

Any doubts arising from the interpretation of this NAP shall be clarified by the Directorate of Markets and Liquidity Management of the BCSTP.

Article 18.
(Entry into Force)

This NAP shall enter into force in accordance with legal provisions.

Central Bank of São Tomé and Príncipe, in São Tomé, June 19, 2015.

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	9/10

ANNEX I

FORMULA TO BE APPLIED IN THE CALCULATION OF THE TRANSACTION VALUE OF TREASURY BILLS, IN THE PRIMARY MARKET

VT = VN 36500
36500 + t . n where:
VT = amount to be debited to acquiring institutions VN = nominal value t = interest rate of the operation on an annual basis, expressed in percentage points and rounded to the hundredth n = term of the operation in days

Reviewed	Revocation Data:

Central Bank of S. T. P.	N A P<br>PERMANENT APPLICATION STANDARD	CODE<br>EE 03
PROPOSER(S)	ENTRY INTO FORCE	ISSUE DATE	DOC NO.	PAGE
PPEEF	19/06/2015	19/06/2015	14/2015	10/10

ANNEX II

(FORM)

PURCHASE PROPOSAL

-TREASURY BILLS-

PROPOSER:

Submits to the BCSTP the following purchase proposal for Treasury Bills to be issued on .... of ... of...., for a term of X days

A. Amount (in Dobras)	B. Annual Interest Rate

São Tomé and Príncipe, on ____ of ____ 201_

Signature of the Proposer:

Reviewed	Revocation Data: