as a primer for other fixed - income securities markets. as a market virtually free of credit risk, its yield curve provides a benchmark for the pricing of other fixed - income securities such as corporate bonds. and as i said, there are also benefits for investors : all classes of investors – the institutional investors like the pension funds and the insurance companies ; the fast - rising mutual funds industry ; the corporate sector ; and even retail investors. the secondary market could offer corporate treasurers new opportunities for liquidity management. since secondary market trading will, for the first time, facilitate market pricing of securities, it will allow pension funds and mutual funds to value their fixed income portfolios on an ongoing basis. one would expect that a more accurate assessment of their portfolio will help pension funds better plan their investment strategies. another important advantage is that the secondary market will extend the menu of investment instruments ; no longer will the investor be compelled to hold on to his five - year bond ; rather, the pension fund can sell its five - year bond and invest in bonds of longer or shorter maturities according to interest rate expectations. as regards the retail market, recent initiatives in the primary bond auctions have made investment in government bonds more accessible to the individual investors. you may recall, the last three bond auctions allowed individuals to purchase bonds in amounts as small as $ 1, 000. with the secondary market, the small investor can now approach any government securities intermediary ( gsi ) to buy and sell bonds, at any time, and have confidence in the transparency of the pricing process. our mandate to foster the development of a secondary market in government securities will also include efforts to develop the use of these securities in repurchase agreements ( repos ). the repo market permits borrowing and lending among market participants, including financial institutions and corporates, to take place on a safe and secure basis while reducing both credit risks and transaction costs. the sec is now in the process of devising a set of rules and a standard “ repo ” agreement to underpin the “ repo ” market. let me concede that the promotion of a vibrant secondary market for government securities has proven to be a major challenge for developing and emerging market economies. newly developed secondary markets are usually very thin and illiquid, with few people willing to sell and many willing buyers. there is no doubt that success depends on the active participation of a whole host of stakeholders – the government, the central bank, as well as

ewart s williams : trinidad and tobago ’ s secondary market for government securities opening remarks by mr ewart s williams, governor of the central bank of trinidad and tobago, at the launch of secondary market for government securities, port - of - spain, 28 january 2008. * * * an important aspect of the mandate of any central bank and particularly a central bank of a developing country is the development of an active capital market. why? because an efficient capital market is an indispensable requirement for sustainable economic transformation. the reasons for this are well - known to you, i am sure, but let me simply re - iterate a few of them. an efficient capital market : • supports the mobilization of domestic savings by providing investors with alternatives for investment and risk diversification. • permits companies and governments to raise long term resources at lower cost. • promotes efficiency and competition in the financial system. • creates an avenue for the population to participate in the corporate sector and share in its wealth. there is a more or less widely recognized sequencing for capital market development and it goes like this : • it usually starts with treasury bill issues, to fund government ’ s short term financing needs and the formation of some kind of money market in which there is the trading of short term funds – a good example is the inter - bank money market. • the second stage is usually a primary government securities market where government issues bonds to help finance capital projects. in the early stages, government securities may be issued to a captive market – for instance to pension funds and insurance companies to help them meet statutory requirements. during this stage, the distribution process tends to be non - transparent and, in a seller ’ s market, at below - market interest rates. • as the economic transformation process evolves, governments seek to promote a third stage – that is the development of a rudimentary equities market. with these basic structures in place efforts are focused on refining and improving the infrastructure related to the government securities and equities market … until, there is a move to the third stage, that is : • the development of a secondary market in government securities and a bit later, a market for corporate securities and a derivatives market. these stages very often overlap and small developing countries seldom move beyond the state of primary government bond issuance and illiquid equity markets. we in trinidad and tobago are trying to move beyond the limitations dictated by small size to create a diversified capital market to facilitate the process of economic transformation and