Reporting system urged for state bond tradings

The Jakarta Post, Bandung

A senior official of the Surabaya Stock Exchange (BES), where trading in corporate bonds takes place, has proposed a regulation requiring all government bond transactions to be reported to the exchange in order to make the bond market more transparent.

BES president director Bastin Purnama said all transactions involving government bonds should be reported to the exchange on a daily basis, just as transactions in corporate bonds have to be reported to the Capital Market Supervisory Agency (Bapepam).

"At present, the BES records about Rp 1 trillion worth of transactions involving government bonds every day, while actually the total value of transactions could reach up to Rp 2 trillion.

"This means that many traders are not reporting their transactions to the BES," he said over the weekend on the sidelines of a media workshop on risk management in Bandung, West Java.

He said the figure of Rp 2 trillion had been obtained from the central bank, where government bonds are traded.

Government bonds are traded over the counter (OTC), which means they are traded outside the exchange.

There should be a regulation so that traders have to report every transaction they make to the exchange so that the real price of the bonds can be accessed and assessed by the public," he said.

"In the United States, trading in government bonds was commonly OTC, but traders there had to report their transactions within hours of their taking place."

Bastian believed that the recent crash in that has affected the mutual funds industry was partly caused by a lack of transparency in the government bonds trade.

"The total asset value of mutual funds is now heading toward Rp 20 trillion, while last week it was still over Rp 40 trillion. This is partly caused by a lack of information on government bond transactions in the market," he said.

The lion's share of mutual funds use government bonds as their underlying assets.

He urged Bapepam to require such reporting to support the creation of transparent capital markets here. "That's why we established the exchange in the first place: to create a well- regulated, transparent and liquid market."

Such a reporting requirement could also support the use of the Indonesian Government Securities Trade System, which had been established to promote transparency in the country's capital markets.

At the moment, reporting was done only on a voluntary basis, said Bastian. (006)