The National Bank of Ukraine sets out the rules governing the execution of transactions involving the purchase and sale of debt securities through participation in the bidding process on stock exchanges. To this effect, the Board of the National Bank of Ukraine has issued Resolution No. 762, dated November 3, 2015 On Approval of the Procedure for Buying/Selling Ukrainian Securities through the Initiation of Auctions on the Trading Floors of Stock Exchanges. The approved Procedure is aimed at ensuring a more flexible regulation of the money market and banks’ liquidity.
The rules set out the procedure and the main terms and conditions for the National Bank’s purchase and sale of Ukrainian government bonds and bonds issued by international financial institutions (IFI bonds) through auctions to be conducted on stock exchanges. The regulator might initiate such auctions for two reasons. The first reason is to regulate the money market. To this end, the regulator may both buy and sell the aforementioned securities. Second, auctions might be initiated to settle claims on refinancing and repo operations. In this case the regulator may sell securities that are used as collateral against these operations.
Bidders shall participate in auctions by submitting bids. In case of buying securities, auction participants may only submit bids specifying the quantity of securities they are willing to unconditionally buy or sell at a price specified in the bid (competitive bids). All the submitted bids, including both bids for purchase and sale, shall be secured by assets.
The bids for purchase of securities shall be satisfied starting from the highest offered prices and moving to lower prices, whereas the bids for sale – starting from the lowest offered prices and moving to higher prices until the total amount of securities to be auctioned is exhausted. All transactions in securities are settled on a “delivery of securities versus payment of funds” basis on the date of signing the agreement.
The resolution comes into effect from December 1, 2015.