A new regulation has just been issued by joint decision of the Minister of Finance and the Governor of the Bank of Greece on the issue of Primary Dealers of Government Debt Securities. Such regulation has amended prior similar decisions issued in 1998 and 1999. According to the regulation, financial or credit institutions, and investment houses based in European Economic Area (EEA) countries may be appointed as Primary Dealers in order to provide specialised services in the market for Government Debt, such as participation in auctions and trading in the organised electronic secondary securities market (hereinafter called “ESSM”, “HDAT” is the acronym in Greek). Primary Dealers are appointed for a period of one year, which may be extended thereafter.

The selection of Primary Dealers takes place each year on the basis of the following criteria:

• Minimum own funds of Euro 375 million (for branches of foreign banks the own funds of the main establishment will count) and generally adequate capital base.
• Existence of organised Dealing Room and Back Office departments.
• Covering at least 3% of the transactions in the ESSM on an annual basis. Said criterion will come into force as of 1.1.2002.
• With respect to Primary Dealers that have not formerly participated in auctions regarding Government Debt or/and in the ESSM, criterion of selection will be their activities in other equivalent European markets and in the secondary market of Government Bonds.

In case the total number of Primary Dealers during each annual period is less than 15 due to lack of interest or elimination or resignation, the Supervision Committee for Primary Dealers (hereinafter the “Committee”) may examine applications by other candidate institutions. The Committee may eliminate Primary Dealers who do not fulfil their obligations or do not meet the above mentioned requirements. On the other hand, Primary Dealers may resign, provided that they submit to the Committee a notice in writing three months prior to the date of resignation. Said elimination or resignation entails a restriction on reelection for the following two years, but does not affect rights and obligations deriving from transactions effected before the resignation.

The Committee has a 2-year term of office and is empowered to evaluate the candidacy of institutions according to the above mentioned criteria, to settle any dispute among the Primary Dealers, to issue the Daily Bulletin, to take disciplinary action and propose to the competent Authorities the imposition of penalties in case the Primary Dealers do not comply with their obligations and to issue rules promoting the transparency and marketability of Government Securities.

Primary Dealers must – among other things - participate in auctions with competitive bids (up to five bids of at least Euro 5 million each), post bid and offer prices on the ESSM for amounts of at least Euro 5 million and make transactions accordingly. The difference between bid and offer prices may not exceed 10 basis points, but this may change in the course of reevaluation of the criteria for appointing Primary Dealers or in the event of a market crisis. Primary Dealers must also promote transactions on Government Debt Securities in the Greek as well as foreign markets and provide to authorities information and opinions on prevailing market conditions. Primary Dealers have the exclusive right to participate in auctions. Auctions shall be carried out at fixed intervals and the competitive bids must be posted until noon (local time) whereas the results of the auction must be announced to the participants until 12.45 on the same day. Supplementary non-competitive bids must be posted by noon on the second working day following the auction and the respective results must be announced by 12.45 on the same day.

The following constraints to the participation of the Primary Dealers in the ESSM are provided by the Regulation :

• minimum daily number of bids : equal to the compulsory number of issues per Primary Dealer
• maximum daily period of abstention : 60 minutes
• minimum total value of transactions in the secondary market : 3% of the annual volume of transactions on the ESSM
• minimum value of successful bids in primary market auctions : 3% annually.

Primary Dealers have certain benefits such as – among other things – their special relation with the Bank of Greece and other market supervisory authorities, priority information on Greek state financing needs and participation in potential future short-term securities lending systems etc. They are also entitled to post one non-competitive bid before the auction and a supplementary bid after the auction, as well as to preferential treatment as regards the participation in Government syndications.

For achieving smooth functioning of the primary and secondary securities market and competitive market conditions, the Government may prefer - apart from auctions and according to the market conditions – the syndication as method for launching benchmark bonds, at their initial issue and exceptionally at subsequent issues. This method does not apply to private placement, issue of savings certificates and share capital increases. Primary Dealers may participate in joint ventures but in case of refusal, the Government may cooperate with banks and financial institutions other than the Primary Dealers.

By decision issued at the same time, the following institutions have been appointed as Primary Dealers for 2001 : ALPHA BANK, BNP PARIBAS, CREDIT SUISSE FIRST BOSTON (EUROPE) LTD, DEUTSCHE BANK AG, NATIONAL BANK OF GREECE, COMMERCIAL BANK, Ε FG EUROBANK ERGASIAS, GOLDMAN SACHS INTERNATIONAL, JP MORGAN SECURITIES LTD, MERRILL LYNCH INTERNATIONAL, MORGAN STANLEY & CO. INTERNATIONAL LTD, SAN PAOLO IMI BANK, SCHROEDER SALOMON SMITH BARNEY, PIREAUS BANK, UBS WARBURG LTD.