Central Bank of Seychelles Operational Guidelines from Policy Tools: Foreign Exchange Auctions (FEA)

Transcription

1 Central Bank of Seychelles Operational Guidelines from Policy Tools: (FEA) June 2017

2 1.0 Introduction The Central Bank of Seychelles (thereafter referred to as the Bank) can intervene in the domestic market to buy or sell foreign exchange (EURO, USD and GBP only) as part of its foreign exchange and monetary operations, through the (FEA). The FEA is one of the instruments available to the Bank for its foreign exchange interventions and is managed as guided under the amended CBS Act The Bank reserves the rights to amend any of the provisions in the document on the basis of its monetary policy stance and/or to reflect market conditions with participants notified of any change in advance. This circular supersedes and replaces all previous circulars on the FEA published by the Bank. 2.0 Terms of the Auction 2.1 Eligibility for participating in (FEA) Other Depository Corporations (ODCs) who are eligible to participate in the FEA are as defined under the Monetary Policy Framework 1 (MPF). 2.2 Schedule for conducting FEA The ODCs will be informed of the intention to conduct an FEA through an auction announcement. No FEA will be conducted in the currency, on the day the respective country for settlement is a non-business day. 2.3 Exchange Rate Determination The exchange rate will be determined through the auction process, using either a variable or single price tender system. The Bank may decide to fix the exchange rate at which it intends to buy or sell foreign exchange. 1 The Monetary Policy Framework (MPF) document is available on CBS website at 2

3 2.4 Limit No limit will be set on the aggregate amount an ODC can bid for in the instrument. ODCs should ensure that the amount bid for does not exceed that which is being offered/asked for in the auction announcement. ODCs should ensure that the aggregate volume of tender will not result in noncompliance with the Bank s set regulations. 3.0 Procedural Instructions for participating in FEA 3.1 Auction Announcement On the auction date, an announcement will be sent on the intention to conduct an FEA. The announcement shall be done via the web portal or via 2 if the web portal is not functioning, prior to the opening of the auction window. The auction announcement shall include at least the following details; A reference number of the auction; for example FEA OFFER The auction type; for example buying foreign exchange Date of the auction ; for example May 18, 2017 Auction Window Start Time: for example 0900 AM Auction Window Closing Time; for example 1000 AM Settlement date for both rupee and foreign exchange; for example May 18, 2017 (t+0) Depending on the auction format, the following information will also be included; the amount intended to be purchased or sold by the Bank, for example US$ 3,000, The offered exchange rate(s) at which it intends to buy or sell foreign exchange, for example buying US $ at SCR13/US$1 3.2 Bidding 2 In the event of s not functioning, the Bank will use alternate means of disseminating the auction announcement. 3

4 ODCs will be provided with a soft copy of the FEA bid/offer table on the web portal which must be completed for submission via the same portal. ODCs are required to specify the amount and the exchange rate at which they wish to acquire or sell foreign exchange. When the exchange rate for the FEA is fixed, ODCs shall state the amount only. (iv) The name of the authorised personnel shall also be provided on the form. (v) Each ODC is allowed to submit a maximum of three (3) bids per auction. (vi) In the event that the web portal is not functioning, bids may be submitted via (omo@cbs.sc), facsimile ( ) or) or hand delivered. Bids sent via facsimile or hand delivered will require two authorised signatories and official stamp details. (vii) For submission via , only requests with the ODC s extensions will be accepted. (viii) Only bids submitted within the specified timeframe and meeting all requirements will be acknowledged. (ix) Submitted bids shall be irrevocable, representing firm commitments of the ODCs and a penalty will be applicable if they are not able to meet any or all of their auction commitments. 3.3 Allotment (iv) For variable rate tender, bids will be allotted at the individual s bidding exchange rates, whereas for single price tender bids will be allotted at one single price derived from the auction, to all successful bidders. For fixed price tender, successful bids shall be allotted at the price set and preannounced. ODC s will be sent a notification of approved and rejected bids via web portal or other means in exceptional circumstances, within half an hour after the closure of the auction. This shall state the amount approved as well as the rate. The sale of foreign exchange will be at the successful individual bidding exchange rates, starting at the highest (or most depreciated) rate through successively lower rates 4

5 until the offering amount is met. The purchase of foreign exchange from the market will be at the accepted individual offered exchange rates, starting at the lowest (or most appreciated) rate through successively higher rates until the asking amount is met. (v) (iv) (v) Allotment will only consider bids which do not diverge by more than 1 per cent from the transaction rate of the Bank 3. This shall be subject to adjustment at the discretion of the Bank. The Bank has the right to accept or reject part, all or any of the bids received and is not required to provide any reason for doing so. The weighted average FEA rate shall be published on the Bank s website on the auction date. In the case where the FEA rate is fixed, the Bank shall also publish the nominal value of total bids received/accepted. 3.4 Settlement Settlement of both Seychelles rupee and foreign currency amounts will be undertaken on the same day of the auction (T+0). 4.0 Penalties In the event of late payment in the specified foreign currency and/or insufficient funds to meet the financial obligations, the aggrieved party (including the Bank) is entitled to claim damage, for every day that payment is delayed, in the form of a penalty, as defined under the respective section on Penalties in the MPF. 3 This is in line with the Article VIII of the Articles of Agreement of the International Monetary Fund (IMF) on Multiple Currency Practice (MCP). 5