The Bangko Sentral ng Pilipinas (BSP) launched on Friday a new electronic system converting the manner at which it borrows from the banks, or its so-called reverse repurchase (RRP) trading activities, from low-tech, slow-speed manual to full electronic.
The central bank—in tandem with the Bankers’ Association of the Philippines (BAP), the Chamber of Thrift Banks and the Money Market Association of the Philippines, among others—signed a memorandum of understanding upgrading the system by which it deals with its constituents more in keeping with the fast-paced nature of its transactions.
The system aims to retire the old method of queuing and placing orders in the RRP via telephone and move to a more comprehensive medium through electronic means.
“The new e-system will replace the manual queuing of the RRP trade orders that are hosted by a coverage of telecommunications and stand-alone trading platforms, for example Reuters and Bloomberg. It will also eliminate the unintended consequence of manually collating transactions from different sources,” BSP Governor Amando M. Tetangco said.
The governor said users of the new e-trading system enjoy straight-through processing and heightened security of settlements and reporting.
Tetangco also hinted of more system upgrades down the line.
“More than the benefits of automation, the e-system opens up for the BSP new horizons for enhancing the way it conducts open-market operations or OMO. This gives the BSP the flexibility to use different methods to allocate RRPs through participating banks, including a possible auction system at some point in time,” Tetangco said, without going into further detail.
A full interest rate corridor was also seen implemented in the future.
BAP President Lorenzo Tan also welcomed the e-system, saying that its establishment was a “significant step” for the industry, as the BSP moves toward greater efficiency, security and timeliness.
“Migration to automation and similar upgrades in the software will have a multiplier effect in terms of stability and integrity of the market,” Tan said, who was also present at the event.
“It will provide BSP improved fine-tuning capabilities of monetary policies consistent with low and stable inflation and balanced econ growth.
“The new system will also provide transparency, ease in access and convenience to participating entities, which will eventually translate to lower cost,” the BAP president added.