Regulation on the Procedure for Placement, Secondary Offering, Additional Placement, Reverse Repurchase and Settlement of Government Securities of the Cabinet of Ministers of the Kyrgyz Republic through the National Bank of the Kyrgyz Republic

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Creation date: 2025-02-10

Approved by resolution

of the Board of Directors

of the National Bank

of the Kyrgyz Republic

No. 20/1 dated 26.06.2013

Regulation

"On the Procedure for Placement, Secondary Offering, Additional Placement, Reverse Repurchase and Settlement of Government Securities of the Cabinet of Ministers of the Kyrgyz Republic through the National Bank of the Kyrgyz Republic"

(In the edition of resolutions of the Board of Directors of the National Bank of the Kyrgyz Republic dated January 29, 2014 No. 2/7, dated October 30, 2014 No. 47/8, dated September 30, 2015 No. 59/4, dated February 10, 2016 No. 7/1, dated February 22, 2017 No. 6/5, dated April 26, 2017 No. 17/3, dated June 14, 2017 No. 2017-P-09/24/4-(NPA))

1. General Provisions

2. This Regulation determines the procedure for the National Bank of the Kyrgyz Republic (hereinafter - National Bank) to carry out operations on the placement, secondary offering, additional placement, reverse repurchase, and settlement of government securities of the Cabinet of Ministers of the Kyrgyz Republic (hereinafter - GS), issued by the Ministry of Finance of the Kyrgyz Republic (hereinafter - Ministry of Finance, Issuer) on the territory of the Kyrgyz Republic.

3. The National Bank carries out operations on the placement, secondary offering, additional (non-auction) placement, reverse repurchase, settlement of GS, and depository accounting of GS based on a contract concluded with the Ministry of Finance, in accordance with the Regulation "On the Issue, Placement, Circulation and Redemption of State Securities of the Kyrgyz Republic", approved by the Resolution of the Government of the Kyrgyz Republic dated October 2, 2008 No. 556, and this Regulation.

4. Government securities of the Cabinet of Ministers of the Kyrgyz Republic within the framework of this Regulation are represented by state treasury bills (hereinafter - STB) and state treasury bonds (hereinafter - STBonds).

5. Placement and secondary offering of GS are carried out by the National Bank on an auction basis through the National Bank's Automated Trading System (hereinafter - ATS). The auction is conducted by a method whereby bids are satisfied at the prices specified in them.

6. In the event of the impossibility of using the ATS, the auction is conducted using any other means that allow the auction to be conducted.

7. The National Bank does not bear obligations on the GS of the Cabinet of Ministers of the Kyrgyz Republic.

8. Additional (non-auction) placement of GS (hereinafter - additional placement) - placement of GS in excess of the announced issue of GS, carried out by the Issuer through the National Bank on a non-competitive basis. Additional placement is conducted at the weighted average price established at the last held auction for the placement of GS of the corresponding maturity, and at a fixed coupon rate within the volume of additional placement announced by the Issuer.

9. Reverse repurchase of GS is carried out by the Issuer through the National Bank and is conducted at a price established by the Issuer, within the volume of reverse repurchase of GS announced by the Issuer.

10. Assignment of a registration number to GS is carried out in accordance with the Regulation "On the Procedure for Assigning a Registration Number to State and Municipal Securities and Keeping a Register of State and Municipal Securities in the Kyrgyz Republic", approved by the Resolution of the Government of the Kyrgyz Republic and the National Bank dated September 13, 2010 No. 201.

11. The conditions and rules established by the Regulation "On the Operation of the Automated Trading System of the National Bank of the Kyrgyz Republic", approved by the resolution of the National Bank dated March 28, 2013 No. 10/18 (hereinafter - Regulation on the Operation of ATS), apply to this Regulation.

12. The right to participate in auctions for primary placement, additional placement, secondary offering, and reverse repurchase of GS is granted to direct participants connected to the ATS. Indirect participants participate in auctions by submitting bids through commercial banks (hereinafter - banks) that are direct participants, and/or acquire GS in the secondary market.

13. Definitions and Terms

For the purposes of this Regulation, in addition to those specified below, the definitions and terms established in the Regulation on the Operation of ATS are applied.

12. Auction - a form of trading in GS, in the course of which the satisfaction of bids is carried out on a competitive basis.

13. Additional (non-auction) placement of GS - non-competitive sale of GS.

14. Competitive sale - sale with indication of the price and quantity of GS purchased at the specified (stated) price.

15. Non-competitive sale - sale of GS at the weighted average price established at the auction.

16. Indirect participant - an individual or legal entity that is not a direct participant of the auction, submitting bids for the purchase of GS through a bank that is a direct participant.

17. Reverse repurchase - an operation for the purchase by the Issuer of GS in circulation.

18. Issue parameters - information about the issue of GS: number, date, issue volume, maturity date, and other information characterizing the GS.

19. Redemption of GS - crediting the nominal value to the accounts of holders of GS of the redeemed issue.

20. Secondary offering of GS - an auction offer of the unplaced part of an announced and partially placed previously issue of GS.

21. Direct participant

– a commercial bank licensed by the National Bank, having a correspondent/current account in the National Bank (hereinafter - Bank), the Social Fund of the Kyrgyz Republic, the State Accumulative Pension Fund at the Social Fund of the Kyrgyz Republic, "ZAO 'Central Depository'" and the Agency for Deposit Protection of the Kyrgyz Republic, having concluded with the National Bank a corresponding contract on work in the market of GS placed through the National Bank.

22. Cutoff price - the price at which the satisfaction of bids ends.

23. Issuer - the Ministry of Finance, acting on behalf of the Cabinet of Ministers of the Kyrgyz Republic.

24. State treasury bills - short-term, interest-free (discount) state securities (term of circulation from 1 to 12 months, multiple of 7, for example: starting from 28 days by 1-month and up to 364 days by 12-months). The nominal value of one STB is equal to 100 som.

25. State treasury bonds - long-term (more than 1 year) state securities with interest income (coupon). The nominal value of one STBonds and the parameters of each issue are determined by the Issuer at the time of issue of STBonds.

26. Conditions for Granting the Status of Direct Participant in the GS Market

27. A bank wishing to work as a direct participant in the GS market must meet at least the following criteria:

· have documents defining the risk management policy when working with GS, the procedure for keeping depository accounting of GS, the internal control system when working with GS;

· have a connection to the ATS;

· have a concluded contract with the National Bank on activities in the market of GS placed through the National Bank (Appendix 1 to this Regulation).

27. As a direct participant, the bank assumes the following obligations:

· on a gratuitous basis, accept competitive and non-competitive bids from resident individuals for GS auctions in all its branches and offices;

· keep depository accounting and service operations on GS purchased on behalf and at the request of its clients - resident individuals on a gratuitous basis;

· publish on its website, as well as on information boards of its branches, information on the weighted average prices and yields established at the last GS auctions, and information on upcoming GS auctions;

· timely provide reports in the format established by the National Bank, as well as other information related to activities as a direct participant, upon requests from the National Bank and/or the Ministry of Finance.

28. The National Bank has the right to conduct on-site inspections and other inspections to verify the performance by banks that are direct participants of their obligations specified in paragraph 27.

29. In case of non-performance or improper performance by banks that are direct participants of their obligations specified in paragraph 27, the National Bank has the right to restrict the access of the direct participant to GS auctions for a period of up to six months.

30. Banks in special regimes (Temporary Administration) may be granted the status of a direct participant upon the presence of a resolution of the Board of Directors of the National Bank permitting operations with GS.

31. Institutional investors - the Social Fund of the Kyrgyz Republic,

the State Accumulative Pension Fund at the Social Fund of the Kyrgyz Republic and the Agency for Deposit Protection of the Kyrgyz Republic, having concluded with the National Bank a contract on activities in the market of GS (Appendix 1-1 to this Regulation), placed through the National Bank, upon having a connection to the ATS, are granted the status of a direct participant.

31.1. ZAO "Central Depository" may be granted the status of a direct participant on the basis of written consent of the Ministry of Finance of the Kyrgyz Republic, upon having a connection to the ATS and a contract with the National Bank on activities in the market of GS placed through the National Bank (Appendix 2 to this Regulation). As a direct participant, ZAO "Central Depository" participates in GS auctions only on behalf and for the account of its clients.

4. Conditions and Procedure for Primary Placement and Secondary Offering of GS

5. The National Bank conducts an auction based on the instructions received from the Issuer and the global certificate for conducting an auction for the placement of GS of established forms. The structure and form of documents for the issue and placement of GS are agreed with the National Bank and approved by the order of the Issuer. Documents necessary for conducting the GS auction are transferred by the Issuer to the National Bank no later than two working days before the date of the auction. The issue parameters of GS are published by the Issuer on the Issuer's website and in the media. The National Bank publishes the issue parameters of GS on the National Bank's website and in the ATS.

6. Bids to participate in the auction for the placement of GS are submitted, edited and/or withdrawn by direct participants in the ATS on the day of the auction from 9:00 to 13:00. After 13:00 on the day of the auction, all bids submitted by direct participants become irrevocable.

7. Bank bids may contain both bids on their own behalf (own bids) and aggregated bids on behalf of their clients - indirect participants (client bids). Bids of institutional investors must consist only of own bids, and bids of ZAO "Central Depository" must consist of bids on behalf of their clients - indirect participants (client bids).

8. Direct participants, except for institutional investors, cannot submit their own bid with a non-competitive offer.

9. An own bid of a direct participant with competitive offers must meet the following requirements:

· number of bids - no more than 5,

· number of securities per bid - multiple of 100,

· minimum number of securities in one bid - no less than 1000 units.

37. The total number of securities in the own bids of a direct participant, including the competitive and non-competitive parts, must not exceed the number of securities placed, i.e., the total volume of own bids by nominal value must not exceed the announced issue volume.

38. A client bid with competitive offers must meet the following requirements:

· number of securities per lot - multiple of 10,

· minimum number of securities in one lot - no less than 100 units.

39. There is no restriction on the minimum volume of a bid with a non-competitive offer submitted from one client and/or institutional investor.

40. The maximum volume of bids submitted from one client, including the competitive and non-competitive parts, must not exceed the announced issue volume.

41. Bids submitted in violation of the established procedure for formatting are recognized as invalid and are not admitted to the auction.

42. The National Bank ensures the confidentiality of the information specified in the participant's auction bid, except for cases of disclosure of information in the manner established by the legislation of the Kyrgyz Republic.

43. Bids with non-competitive offers are satisfied first. The maximum limit of satisfaction is 30% of the issue volume by nominal value. In the event that the total volume of bids with non-competitive offers exceeds 30% of the issue volume of GS by nominal value, their satisfaction is carried out on a proportional basis.

44. The issue volume remaining after satisfying bids with non-competitive offers is distributed among bids with competitive offers. Bid lots are ranked by purchase prices in descending order and are satisfied starting from the lot with the maximum price, then - downwards to the cutoff price. In the event that more than one bid is submitted at the cutoff price, the distribution of securities among these bids is carried out on a proportional basis.

45. If both the own bid of the bank and the bids of its clients are submitted at the cutoff price, the distribution of securities is carried out among these bids on a proportional basis.

46. A non-competitive bid is satisfied at the weighted average price.

47. Preliminary processing of bids admitted to the auction is carried out in the ATS on the day of the auction from 13:00 to 14:00.

48. Preliminary auction results are transmitted to the Issuer on the day of the auction no later than 14:30 via the ATS for the Issuer to make a decision.

49. The Issuer may make one of the following decisions: approve the auction results or declare the auction unsuccessful.

50. The Issuer approves the auction results within the following limits:

· maximum satisfaction of bids is limited to a 25% excess of the issue volume;

· minimum satisfaction of bids is ensured within the following limits:

in the event that the sum of submitted bids is equal to or exceeds the volumes of the announced emission - the minimum satisfaction of bids is 25 percent of the announced emission;

in the event that the sum of submitted bids is less than the announced emission - the minimum volume of satisfied bids is established within the submitted bids.

51. The Issuer has the right to declare the auction unsuccessful in the following cases:

· with the participation in the auction of less than three participants;

· if the weighted average yield of accepted bids exceeds by 15% the weighted average yield established at the last auction.

52. The Issuer approves the auction results by 15:30 on the day of the auction.

53. After the Issuer approves the auction results, final processing of bids is carried out in the ATS and summary results of the auction are published.

54. In the event of the Issuer approving the auction results, summary results of the auction are communicated to direct participants: volumes of demand and placement, weighted average prices, maximum bid price and cutoff price, number of auction participants; separately to each direct participant, the quantity and cost of GS purchased by them and their clients as a result of participation in the auction are communicated.

55. Summary results of the auction are published in periodicals and on the National Bank's website.

56. Parameters of the secondary offering of GS are published by the Issuer on the Issuer's website and in the media. The National Bank publishes the parameters of the secondary offering of GS on the National Bank's website and in the ATS.

57. Conditions and Procedure for Additional Placement of GS

58. Information on the parameters of additional placement of GS is published by the Issuer on the Issuer's website, and also published by the National Bank on the National Bank's website and in the ATS. The right to participate in the additional placement of GS is granted to direct participants connected to the ATS. Indirect participants participate in the additional placement of GS by submitting bids through banks.

59. The procedure and conditions for submitting bids to participate in the additional placement of GS are similar to the procedure for submitting bids for an auction for the primary placement of GS issues.

60. Bank bids may contain both bids on their own behalf (own bids) and aggregated bids on behalf of their clients - indirect participants (client bids). Bids of institutional investors must consist only of own bids, and bids of ZAO "Central Depository" must consist of bids on behalf of their clients - indirect participants (client bids).

61. An own bid of a direct participant and/or a client bid for additional placement of GS must meet the following requirements:

· number of bids - no more than 1,

· number of securities per lot - multiple of 10,

· minimum number of securities per lot - no less than 100 units.

61. The number of securities in the own bid of a direct participant must not exceed the announced volume of additional placement.

62. The maximum volume of a bid submitted from one client must not exceed the announced volume of additional placement.

63. Bids submitted in violation of the procedure for formatting are recognized as invalid and are not admitted to the auction.

64. The National Bank ensures the confidentiality of the information specified in the bid of the participant of the additional placement, except for cases of disclosure of information in the manner established by the legislation of the Kyrgyz Republic.

65. Bids of participants of additional placement are executed for the number of securities specified in them. The cost of the bid is calculated by multiplying the number of securities specified in the bid by the weighted average price established at the last held auction for the placement of GS of the corresponding maturity. In the event that the total volume of bids exceeds the volume of additional placement of GS by nominal value, the distribution of GS among these bids is carried out on a proportional basis.

66. Processing of bids admitted to additional placement in the ATS is carried out on the day of additional placement from 13:00 to 14:00. No later than 14:30 on the day of additional placement, the results of additional placement are transmitted to the Issuer via the ATS.

67. Summary results of the auction are communicated to direct participants: volumes of demand and placement, number of participants in additional placement; separately to each direct participant, the quantity and cost of GS purchased by them and their clients as a result of participation in the additional placement are communicated.

68. Summary results of additional placement are published in the ATS, periodicals and on the National Bank's website.

69. Conditions and Procedure for Reverse Repurchase of GS

70. Information on the conditions (price, volume and registration number of purchased GS) and the date of conducting the reverse repurchase of GS, for which reverse repurchase is offered, is published by the Issuer on the Issuer's website, and also published by the National Bank on the National Bank's website and in the ATS. Reverse repurchase of GS is carried out among direct participants connected to the ATS, indirect participants participate by submitting bids through banks.

71. Bids to participate in the reverse repurchase of GS are submitted, edited and/or withdrawn by direct participants in the ATS on the day of conducting the reverse repurchase from 9:00 to 13:00. After 13:00 on the day of the reverse repurchase, all bids submitted by direct participants become irrevocable.

72. Bank bids may contain both bids on their own behalf (own bids) and aggregated bids on behalf of their clients - indirect participants (client bids). Bids of institutional investors must consist only of own bids, and bids of ZAO "Central Depository" must consist of bids on behalf of their clients - indirect participants (client bids).

73. The minimum number of securities in the own bid of a direct participant for reverse repurchase must meet the requirement: the number of securities must be no less than 100 units and multiple of 10.

74. The number of securities in the bid of a direct participant must not exceed the number of securities to be repurchased, i.e., the volume of the own bid by nominal value must not exceed the announced volume of reverse repurchase.

75. The minimum number of securities submitted from one client must meet the requirement - to be no less than 10 units and multiple of 10.

76. The number of securities submitted from one client must not exceed the announced volume of reverse repurchase.

77. Bids filled in violation of the procedure for formatting are recognized as invalid and are not admitted to the reverse repurchase.

78. The National Bank ensures the confidentiality of the information specified in the bid of the participant of the reverse repurchase, except for cases of disclosure of information in the manner established by the legislation of the Kyrgyz Republic.

79. Bids of participants of reverse repurchase are executed for the number of securities specified in them. The cost of the bid is calculated by multiplying the number of securities specified in the bid by the price established by the Issuer. In the event that the total volume of bids with offers for reverse repurchase exceeds the volume of reverse repurchase established by the Issuer by nominal value, their satisfaction is carried out on a proportional basis.

80. Processing of bids admitted to reverse repurchase in the ATS is carried out on the day of conducting the reverse repurchase from 13:00 to 14:00. No later than 14:30 on the day of the reverse repurchase, the results of the reverse repurchase are transmitted to the Issuer via the ATS.

81. Final results are published in the ATS no later than 15:00 on the day of conducting the reverse repurchase.

82. Summary results of the reverse repurchase are published in periodicals and on the National Bank's website.

83. Settlements

84. Settlements on the results of the auction for placement and additional placement are carried out on the date of issue of GS, secondary offering and reverse repurchase are carried out on the next working day. Payment of coupon payments and redemption of STBonds is carried out in accordance with the terms of issue of STBonds.

85. Direct participants on the day of issue of GS ensure a sufficient volume of funds in the national currency of the Kyrgyz Republic in their correspondent account in the National Bank of the Kyrgyz Republic to pay for the purchased quantity of GS according to satisfied bids to participate in the auction for placement and/or additional placement.

86. After conducting the auction for secondary offering, direct participants on the next working day ensure a sufficient volume of funds in their correspondent account in the National Bank to pay for the purchased quantity of GS, according to satisfied bids to participate in this auction.

87. The Issuer on the next working day after conducting the reverse repurchase ensures a sufficient volume of funds in the national currency of the Kyrgyz Republic in the current account of the Central Treasury of the Ministry of Finance in the National Bank to pay for the purchased quantity of GS according to the results of the conducted reverse repurchase.

88. Partial payment of purchased GS is not allowed. In the event that a direct participant of the auction does not have a sufficient volume of funds in the national currency of the Kyrgyz Republic in their correspondent account in the National Bank to pay for the purchased GS in full, their bid is cancelled. In this case, the direct participant of the auction is obliged to pay the Issuer a penalty in the amount of one percent of the nominal value of the purchased GS, but no more than one percent of the paid-up charter capital of the direct participant of the auction. Until the payment of the penalty, the direct participant of the auction is not admitted to subsequent auctions.

89. The National Bank, on the basis of the Issuer's instruction, carries out the payment of coupon payments on GS and/or redemption of GS on the date determined by the Issuer in accordance with the terms of issue of GS.

90. The Issuer ensures a sufficient volume of funds for the payment of coupon payments on GS and/or redemption of GS on the date determined by the Issuer in accordance with the terms of issue of GS.

91. The procedure for conducting settlements on GS is established in accordance with this Regulation and the Regulation on the Operation of ATS.

92. Final Provisions

93. Risk management methods for operations with GS are determined

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