The Competition Commission of Pakistan (CCP) has initiated an inquiry into the suspected cartelization by primary dealers (PDs) in the auctions of Market Treasury Bills (T-bills) carried out by the government of Pakistan. However, the State Bank of Pakistan (SBP) is not cooperating with the CCP, which has prompted the CCP Chairperson Rahat Kaunain Hassan to formally request the Chairman of the Senate Standing Committee on Finance to intervene and direct the SBP to assist in the inquiry.
The CCP has repeatedly requested the SBP to provide the necessary information on the matter and cooperate with the inquiry, which is critical. A preliminary probe was undertaken due to various concerns raised with respect to the significant rise in the yields for all tenures of T-bills issued by the government in auctions. The scheduled banks, DFIs, investment banks, and listed brokerage houses are eligible to become PDs of government securities.
The rise in yields has been deemed unwarranted by the SBP, which has also expressed concerns that since the government could no longer borrow directly from the SBP, it was reliant on commercial banks for meeting its funding requirements, placing the commercial banks in a position to dictate terms.
The Commission’s initial examination of the bidding data revealed instances where PDs submitted similar/identical bids, and common bidding patterns were also followed by some of the PDs. Moreover, there was an indication of rotation among the PDs, and the increase in rates quoted was also simultaneous. In most of the bids, the major chunk of the bid was won by or awarded to a single bidder. These factors required further scrutiny for any possible collusive bidding on part of the primary dealers and/or also required to enquire into the factors, if any, that may have contributed to the quoting/charging of higher rates than before.
The Commission has also asked the SBP to appoint a focal person to assist the inquiry officers and help understand the processes in place to ensure free market operation in the bidding process. Bid rigging or any form of coordination during the bidding process by the parties is prohibited under Section 4(2)(e) of the Competition Act, 2010.
The CCP is seeking cooperation from the SBP to complete its inquiry into suspected cartelization by PDs in the auctions of T-bills. The involvement of the Senate Standing Committee on Finance is expected to ensure timely and effective completion of the inquiry, which is critical to ensuring a fair and transparent bidding process in the future.
