Forex auction rules miss deadline
Bank of Jamaica (BOJ) said it is still consulting with foreign exchange dealers as well as the International Monetary Fund (IMF) on the formulation of rules that will govern the proposed multiple-price foreign exchange auction.
It has missed the March 2017 timeline it had planned to publish the rules, but said it is now in constant dialogue with the fund, from which it expects receive more technical advice before it embarks on implementing the system.
BOJ Senior Deputy Governor John Robinson was unavailable for comment, but last November he told the Financial Gleaner that trading under the new system was expected to start in July 2017.
Under a competitive auction system, the central bank will buy foreign exchange first from bidders who offer to sell at the lowest price, while it will sell first to those who offer to buy at the highest price.
Competitive auctions create a level playing field for all participants, provide transparency and efficient price discovery, and protect the public purse, the central bank said in a release.
It said the competitive auctions will be introduced gradually and will occur in a context of ongoing consultation with market stakeholders and technical advice from the IMF.
"These plans are not a return to the foreign exchange auction system of the 1980s, which was about allocating scarce foreign currency and which centralised all foreign exchange trading at the BOJ," the bank emphasised.
The central bank said it now has the opportunity to concentrate more closely on upgrading elements of its monetary policy operations, including its reaction to the foreign exchange market, because of sustained economic stability and an ongoing economic reform programme with continued fiscal discipline and consolidation.
It already operates auctions for deposit-taking institutions that borrow Jamaican dollars weekly in the domestic money market, and regular auctions of one-year certificates of deposit.
It also conducts monthly auctions of Treasury bills on behalf of the Government of Jamaica.
The BOJ pointed out that individuals and businesses will not be directly affected by this planned change, and when the central bank introduces foreign exchange auctions in Jamaica, the transition will only affect the way in which it interacts with authorised dealers and cambios.
"This means that the new operational approach will not, in any way, change the manner or freedom in which the public currently buys or sells foreign exchange from or to their bankers or cambios. There will be no changes to the public's ability to convert, spend or save foreign exchange as and where it sees fit," BOJ said.
"On the other hand, interested members of the public will receive more precise and timely information on the foreign exchange market."