The amendment to the Government Securities Act will allow for the early redemption of Singapore Government Securities (SGS) which is currently not allowed.

This means the Monetary Authority of Singapore (MAS) may now redeem their securities at market prices before maturity, if there are good reasons to do so.

At the second reading of the amendment Bill, Second Finance Minister Lim Hwee Hua said “the practice of early redemption is common among the central banks and will provide more flexibility in the management of SGS”.

The Bill also formalizes two roles of the MAS.

-First, as regulator of the financial institutions that distribute these securities- primary dealers.

Under the new rules, MAS can direct primary dealers, who must comply.  It can also take regulatory action such as canceling or suspending appointments of primary dealers if necessary.

During the debate, Mdm Ho Geok Choo (West Coast GRC) expressed concern over what she sees as” heavy obligations” on the primary dealers, asking for examples of the type of directives they have to comply with.

Mrs Lim clarified that the Bill merely formalizes existing arrangements and does not increase their obligations. Rather, it” sets out a clearer legal and due process framework which will give greater certainty to all the stakeholders”; the Government, MAS, the primary dealers and investors.

Some examples of directives include the requirement for the dealers to fully underwrite the SGS in an auction, and the obligation to make purchase and sale bids under all market conditions, she said.

-The second MAS role centres on it entering into arrangements with primary dealers in the lending of government securities, enabling market participants to borrow these securities from the MAS for short periods when they are not readily available from other sources.

This arrangement, said Mrs Lim, “provides primary dealers with greater confidence in delivering SGS to investors and enhances the overall liquidity, efficiency and robustment of the government securities market.”