ANALYSIS OF PRIMARY DEALER IMPLEMENTATION IN PRO MARKET MONETARY OPERATION TRANSACTIONS

Aryo Sasongko, Cicilia Anggadewi Harun, Rahutomo Anugrah Dewanto, Wahyu Widianti, Geyana Ledy Fista, Kusfisiami Wima Mustika, Astrika Erlin, Ibrahmi Adrian Nugroho, Putra Prima Raka and Misbahol Yaqin
Additional contact information
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

No WP/10/2024, Working Papers from 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.

Keywords: Primary dealer; concentration risk; liquidity; interest rate; counterparty connection (search for similar items in EconPapers)
JEL-codes: E43 G21 G28 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2024
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http://publication-bi.org/repec/idn/wpaper/WP102024.pdf First version, 2024 (application/pdf)

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