The Bank of Ghana (BoG) has announced key regulations to govern the conduct of competitive multiple-price foreign exchange (FX) auction to allocate foreign exchange against the Ghana Cedi.
Multiple-price auctions would support market development, price formation and also to provide a transparent mechanism to intermediate FX proceeds from Cocoa Syndicated Loans to the market, according to a statement issued by the Communications Department of the Bank of Ghana on Friday 25, November 2016 (today).
It stated: “To ensure a well-functioning foreign exchange market and to further develop the foreign exchange market within the financial system of Ghana, the Bank of Ghana hereby issues these regulations to establish the methodology that governs the procedures for participation of the eligible Authorized Foreign Exchange Dealer Banks in the Competitive Multiple-price Foreign Exchange Auctions”.
Read the unedited statement below
BANK OF GHANA REGULATIONS FOR ALLOCATION OF FOREIGN EXCHANGE THROUGH COMPETITIVE MULTIPLE PRICE FX AUCTIONS REGULATION NO: BG/RG/FXAUC/2016/11/01
The Bank of Ghana (BoG) announces the following regulations to govern the conduct of competitive multiple-price foreign exchange (FX) auction to allocate foreign exchange against the Ghana Cedi.
Multiple-price auctions would support market development, price formation and also to provide a transparent mechanism to intermediate FX proceeds from Cocoa Syndicated Loans to the market.
To ensure a well-functioning foreign exchange market and to further develop the foreign exchange market within the financial system of Ghana, the Bank of Ghana hereby issues these regulations to establish the methodology that governs the procedures for participation of the eligible Authorized Foreign Exchange Dealer Banks in the Competitive Multiple-price Foreign Exchange Auctions.
All participants shall be expected to fully abide by the following rules.
REGULATIONS GOVERNING THE FOREIGN EXCHANGE AUCTION PROCESS
- Publication of Foreign Exchange Auction Calendar
The BOG will publish an auction calendar for the foreign exchange market on quarterly basis. The calendar will be published one week preceding the quarter on the Bank of Ghana website and on the BoG Page cpurl://ts.cp./Apps/Auctions on Reuters Terminal to enable market participants to adequately plan.
The announcement shall list the date and time, auction volume target, settlement and other information. Annex I provides a sample auction announcement.
- Eligibility
Participation in the auction is restricted only to the Authorized Foreign Exchange Dealing Banks.
- Eligible Currency and Quotation Convention:
- a) The auctions shall be limited to purchase or sale of the United States Dollar (USD) against equivalent value in the national currency – Ghana Cedi (GHS).
- b) The quotation of rates for bids placed in the auction shall indicate the equivalent value in the national currency (Ghana Cedi/ GHS), expressed against one unit of the USD quoted up to 4 decimal places. Example of the rate quotation for bid is 3.9805
- Auction Schedule and Frequency:
- a) The FX auction shall be held fortnightly as per the announced quarterly calendar by the BOG on Wednesdays with settlement on T+2. In the event that a national holiday falls on Wednesday the auction will be held on the next business day.
- Bidding Process:
- a) Authorized Banks shall submit their bids via a secured BOG Page cpurl://ts.cp./Apps/Auctions on Reuters Terminal or through a designated email in the approved format provided by the BOG. Annex II of these regulations provides the format.
- b) Each bank is permitted to submit a maximum of [3] bids in the auction, quoting their desired amount and at their freely determined exchange rate as per quotation convention.
- c) The minimum bid size is US$500,000 and in multiples of US$250,000, and expressed in numbers. Maximum bid size of a single bid shall not exceed ten percent (10%) of the announced auction target.
The cumulative volume of all bids from any single bank shall not exceed twenty percent (20%) of the announced target for the auction.
- d) Bids with incomplete or missing information or submitted after deadline shall not be accepted. e) Bids exceeding the maximum single bid amount or lower than the minimum bid amount shall not be accepted.
BOG reserves the right to reject the bid placed at the lowest exchange rate in the case of a sell-auction and highest exchange rate in the case of a buy-auction if bids of any bank exceed the cumulative volume limit.
- f) Each bid is final and is irrevocably binding on the bidding bank. Once a bid has been submitted, no request for changes will be entertained by the BOG.
- Allocation Methodology
- a) The multiple-price auctions would be fixed volume format; the auction cut-off rate would clear the target volume offered in the said auction, accepting bids on best price principle.
- b) The amount rule would require that not less than 25 percent of the auction target is allocated. c) The general principle followed would be that the amount accepted at the auction be kept close to the announced volume, probable variance of not more than ±10 percent of auction target.
- d) The under-fulfillment of the auction is only if the bids are clearly out of the market or outside the ±2 percent price range of the previous trading session or if in case of weak demand; however, the rule 6 (b) would still be adhered.
- Auction Committee
- a) An auction committee comprising of BOG staff appointed by the Governor shall oversee the conduct of the auction and decide on the cut-off, guided by the allocation methodology in paragraph 6.
- b) Only authorized BOG officials may be present at the time of the auction allocation process. Details of individual bids of banks will be kept confidential.
- Communication of auction results to the market
- a) FX Auction results will be published on the BOG’s Page cpurl://ts.cp./Apps/Auctions on the Reuters Terminal at 11.45am, on the day of the auction.
- b) Please see Annex III for the format of Auction Results.
- Confirmation and Settlement of Trade:
- a) Unless otherwise announced, the settlement period for the auction shall be T+2. This is to alleviate liquidity planning for banks and to move the FX market to the international standard of spot settlement.
- b) FX dealers of the successful banks shall call BOG Dealing Desk via the Reuters Dealing System to confirm and conclude trades for accepted bids to facilitate STP settlement.
- Other Provisions
- a) All the foreign exchange regulations will apply to foreign exchange funds acquired or sold at the auction.
- b) In particular, the banks are reminded to comply strictly with the regulations in respect of foreign exchange exposure limits as prescribed by the BOG.
- c) All Authorized Foreign Exchange Dealer Banks shall also comply with the provisions of the Code of Conduct for the Interbank Foreign Exchange market in Ghana.
- d) These regulations shall be reviewed as and when the BOG deems it necessary. e) The Bank reserves the right to amend these rules from time to time based on experience and prevailing circumstances.
Enquiries on these Guidelines may be directed to the Treasury Department, Bank of Ghana.
Annex I: AUCTION CALENDAR
Notice No: BOG/TD/FXAUC/2016/001
AUCTION TARGET CALENDAR FOR MULTIPLE-PRICE FOREIGN EXCHANGE AUCTIONS
QUARTER IV – NOVEMBER TO DECEMBER 2016
The Bank of Ghana announces for the information of all Authorized Foreign Exchange Dealing
Banks the Auction Calendar for Foreign Exchange Auctions to be held between the period of
November and December 2016.
In accordance to the Regulations No: BG/RG/FXAUC/2016/11/01 bids are invited as per the
prescribed format to purchase USD against GHS, separately on each auction date and should be
submitted via Reuters Auction system.
Month Auction # Date Bid Close Time Volume Target
November 0001/2016 11/30/2016 11:00 am US$ 20,000,000
December 0002/2016 12/14/2016 11:00 am US$ 20,000,000
0003/2016 12/28/2016 11:00 am US$ 20,000,000
Cumulative Auction Target for the three Auctions US$ 60,000,000
- Receipt of Bids Between 9:30am until 11:00 am; on the
date of auction
- Opening of Bids/ Review Between 11:00 am – 1130 am; on the
date of auction
- Announcement of Result 11:45 am; on the date of auction
The Competitive Multiple-price Foreign Exchange Auctions will be governed by the regulation
published and available on the Bank of Ghana website.
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