The Bank of Ghana has announced guidelines for allocation of foreign exchange (FX) through forward auctions to Bulk Distribution Companies.
This will govern the conduct of foreign exchange forward auctions on the interbank foreign exchange market for the BDCs licensed by the National Petroleum Authority (NPA).
According to the Central Bank, this bespoke multipleprice forward FX auctions is intended to minimise the uncertainty of the future availability of FX and aid price discovery especially for the general pricing window within the downstream sector.
All participants shall therefore be expected to fully abide by rules such as publication of foreign exchange auction calendar, eligibility, eligible currency and quotation convention, auction schedule and frequency and bidding process.
The rest are allocation methodology, auction committee, communication of auction results to the market, confirmation and settlement of trade and funding.
For publication, the BoG will publish an auction target incorporating inputs received from the NPA for the foreign exchange forwards on a bi-weekly basis. The target will be published four days preceding the pricing window for the downstream sector on the Bank of Ghana website to enable market participants plan adequately. The announcement shall subsequently list the date and time, auction volume target, settlement and other relevant information.
In terms of eligibility, participation in the auction is restricted to only authorised Bulk Distribution Companies licensed by the NPA through their authorized Licensed Foreign Exchange Dealing Banks.
With regard to the auction schedule and frequency, it will be done in consultation with the NPA on pricing window schedules. The FX auction shall be held bi-weekly and conducted no later than three working days before the 1st and 16th of each month.
Also, the auction committee will comprise of BoG staff appointed by the Governor, and shall oversee the conduct of the auction and decide on the cut-off rate, guided by an allocation methodology.
Again, 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.
FX Auction results will also be published on REFINITIV dealing system by 3.00pm on the day of the auction.
For other provisions, the FX market conduct rules will apply to foreign exchange funds acquired or sold at the auction.
In particular, the banks have been reminded to comply strictly with the regulations in respect of foreign exchange exposure limits as prescribed by the BOG (NOPs). C
Also, 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.
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