Bahrain Bourse Adopts the Treasury Bills Trading Guidelines

Bahrain Bourse Adopts the Treasury Bills Trading Guidelines

The Chief Executive Officer of Bahrain Bourse (BHB), Sheikh Khalifa bin Ebrahim Al-Khalifa issued on Sunday, 24th January 2016 Resolution No. (1) of 2016 in respect of adopting the Guidelines on the Trading of Treasury Bills (T-Bills) at the Bourse.

Sheikh Khalifa said that the T-Bills Market is one of the joint initiatives between the Central Bank of Bahrain (CBB) and Bahrain Bourse that aims to enhance and develop the capital markets sector in the Kingdom of Bahrain and increases the depth of the market by offering investors with more investment options. Sheikh Khalifa expressed his sincere thanks to the officials of the CBB and H.E. Mr. Rasheed Moh’d Al-Maraj, the Governor of the CBB for their efforts and cooperation in transforming this initiative to a reality. 

“We hope that all related parties benefit from the markets available at BHB in order to meet their financing needs as this instrument is they are considered less costly for issuers in comparison to other ways of financing,” Sheikh Khalifa added.

It is known that Treasury Bills are one of the investment instruments used by governments and central banks for short-term financing with reasonable returns taking in consideration the term of these issues that is usually between 3-9 months. T-Bills are usually issued monthly, and are considered very low-risk investments for investors. 

Trading in Treasury Bills will be conducted during the trading session of BHB, from Sunday to Thursday between 9:30am and 1:00pm. According to the guidelines, investors can submit their orders to the brokers to enter them in the T-Bills Market through the Automated Trading System that will match the buy and sell orders in accordance with the principles for matching orders as per the “Matching Priority” Rule of BHB. 

The minimum accepted order in the T-Bills Market is BD5000 (Five Thousand Dinars) or its equivalent in the T-Bill currency. In addition, the guidelines determine the pricing and settlement mechanism implemented in the T-Bills Market, in which the Automated Trading System will automatically calculate the full value of the T-Bills in each transaction individually calculated until the settlement date based on the duration the T-Bill has been held. The settlement day for the trades is two days following the trade date (T+2). The guidelines also stipulate that the daily price variations (up or down) is limited to a maximum of 5% of the previous closing price. 

T-bills are issued through a competitive bidding process at a discount from par, which means that rather than paying fixed interest payments like conventional bonds or Islamic sukuk, the appreciation (movement) of the T-bills toward maturity provides the return to the holder until he gets the full par value of the T-bills at maturity. 

It is worth mentioning that a Resolution was issued by BHB’s Chariman last Wednesday in respect of introducing the Treasury Bills Market at Bahrain Bourse and adding it to the markets at BHB. Several T-Bills issued by the Central Bank of Bahrain are expected to list at the Bourse that will enable investors to trade this new instrument and benefit from its availability in the secondary market. Adding the T-Bills Market to BHB will provide investors the opportunity to diversify their investment portfolios and manage their risk by investing in more than one instrument.

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