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Analysis Of Primary Dealer Implementation In Pro Market Monetary Operation Transactions

Author

Listed:
  • Aryo Sasongko

    (Bank Indonesia)

  • Cicilia Anggadewi Harun

    (Bank Indonesia)

  • Rahutomo Anugrah Dewanto

    (Bank Indonesia)

  • Wahyu Widianti

    (Bank Indonesia)

  • Geyana Ledy Fista

    (Bank Indonesia)

  • Kusfisiami Wima Mustika

    (Bank Indonesia)

  • Astrika Erlin

    (Bank Indonesia)

  • Ibrahmi Adrian Nugroho

    (Bank Indonesia)

  • Putra Prima Raka

    (Bank Indonesia)

  • Misbahol Yaqin

    (Bank Indonesia)

Abstract

TThis study explores the impact of primary dealer system implementation on counterparty connections, prices, liquidity, and concentration risk in the Indonesian Money market. Using transaction data of interbank money market instruments, we find that the implementation of the primary dealer system increases the degree of centrality (number of counterparty connections) in the Indonesian Repo and time deposit markets. The implementation of primary dealers also leads to an increase in nominal transactions of Bank Indonesia Rupiah Securities (SRBI). The simulation results of primary dealer selection by clients show that the greater the demand of banks participating in monetary operations with limited primary dealer liquidity, the faster the orders are concentrated on primary dealers with large liquidity. Vice versa, the smaller the demand of banks participating in monetary operations with large liquidity, the orders tend to be scattered. The larger the order size of banks participating in monetary operations, the faster orders are concentrated in primary dealers with large liquidity. Vice versa, the smaller the order size of banks participating in monetary operations, the orders tend to be scattered.

Suggested Citation

  • Aryo Sasongko & Cicilia Anggadewi Harun & Rahutomo Anugrah Dewanto & Wahyu Widianti & Geyana Ledy Fista & Kusfisiami Wima Mustika & Astrika Erlin & Ibrahmi Adrian Nugroho & Putra Prima Raka & Misbahol, 2024. "Analysis Of Primary Dealer Implementation In Pro Market Monetary Operation Transactions," Working Papers WP/10/2024, Bank Indonesia.
  • Handle: RePEc:idn:wpaper:wp102024
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    More about this item

    Keywords

    Primary dealer; concentration risk; liquidity; interest rate; counterparty connection;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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