Products & services

Tomorrow, Together

Financial Instruments

The discount house will trade the following financial instruments as prescribed by the CBL at the moment:

  • Government Treasury bills and other shortterm government securities
  • Central Bank bills and other open market (OMO) instruments
  • Government bonds (subject to maturity profile)
  • Negotiable instruments of deposit (NID) or negotiable certificate of deposit (NCD) issued by Liberian banks and other financial institutions
  • Bankers acceptances (BAs)
  • Highly liquid corporate paper and corporate debt instruments

 

Activities or services

As prescribed, the discount house will trade financial instruments with counter- parties in the ways prescribed by the CBL described below.
  • To facilitate the issue and sale of short-term government securities, Central Bank of Liberia securities and other eligible short-term financial instruments (including commercial bills issued by private and state-owned Liberian corporations);
  • To enter into repurchase agreements (repos) and reverse repurchase agreements (reverse repos) of eligible securities approved by the Central Bank of Liberia from time to time;
  • To carry out sellback or buyback transactions of financial instruments;
  • To accept call money from licensed banks and other financial institutions;
  • To participate in interbank borrowings and placements;To facilitate the issue and sale of short-term government securities, Central Bank of Liberia securities and other eligible short-term financial instruments (including commercial bills issued by private and state-owned Liberian corporations);
  • To enter into repurchase agreements (repos) and reverse repurchase agreements (reverse repos) of eligible securities approved by the Central Bank of Liberia from time to time;
  • To carry out sellback or buyback transactions of financial instruments;
  • To accept call money from licensed banks and other financial institutions;
  • To participate in interbank borrowings and placements;
  • To trade eligible financial instruments in the secondary market;
  • To provide discount or re-discount facilities for Treasury securities and other eligible financial instruments;
  • To provide fund or portfolio management and financial advisory services;
  • Accept short term investments in the form prescribed by the Central Bank of Liberia; and
  • To perform other activities as may be prescribed by the Central Bank of Liberia from time to time or under any other written law of Liberia.
 

This is essentially where eligible securities are sold against cash with a simultaneous commitment or agreement to buy back eligible securities at a specified date and price fixed at transaction date. The CBL has prescribed 180 day repos but longer-dated repos will have to be considered against market realities.

The opposite of a repo is called a reverse repo where securities are bought against cash with a simultaneous undertaking to sell them back at a future date at a price fixed in advance. This transaction temporary releases liquidity to a holder of a financial instrument.

This is where securities are sold or bought outright with prior agreement of a buyback. The transaction is final. This is where the discount house creates liquidity into the hands of a financial instrument owner who wants to encash their investment before maturity. It is one of the most important features of a liquid secondary market.

This is a repo in which specific eligible financial instruments are traded on open terms where investors place funds which are called on some pre-agreed notice such as 7 days. The instrument on which these open-ended funds are pegged are not available for re-trade in compliance with regulations.

This is money placed by banks with a discount house as part of their reserve requirements. It is a very important source of funding for a discount house in its market making role.