The Reserve Bank had last week granted approval to four firms: JP Morgan Securities, ABN-Amro Securities, Tata Finance Securities and Ceat Financial Services -- to operate as PDs in the GoI-Secs market, taking the total number of PDs to 10.

Reddy said that the central bank is in the process of evolving a system that would ensure that auctions of GoI-Securities does not devolve on it. Speaking to mediapersons at a seminar on Fixed Income Markets organised by the National Stock Exchange (NSE) and International Securities Market Association (ISMA) here today, Reddy said that "underwriting (of GoI-Secs) is not an ideal solution", adding that PDs, who are mostly banks and other financial institutions have a role to play in this regard.

Earlier in theday, Reddy said that an electronic dealing system (EDS) is to be developed in co-ordination with the primary dealers' association. The EDS will facilitate on-line trading in the money markets, GoI-Secs and other debt instruments.

"The Reserve Bank is actively co-ordinating with the primary dealers association in developing an EDS to facilitate dealing in money markets, GoI-Secs and other debt instruments. This will lend transparency and efficiency to market operations. It will also enable the Reserve Bank to monitor developments in the market on-line," said Reddy.

The Reserve Bank has embarked on the computerisation of its public debt offices (PDOs). This would link up the PDOs with treasury rooms of banks. "Hopefully, primary dealers, satellite dealers and other subsidiary ledger holders (SGL) and stock exchanges will also be linked", Reddy said, adding: "There is an enormous advantage in providing member terminals to SGL account holders as this will enable them to view Reserve Bank announcementsregarding fresh auctions, flotation of issue, conversion of loans, repo auctions, interest rate resets for floating bonds and other such information.''

"Market participants will also be able to tender bids in auctions of GoI-Secs, T-Bills and repos from all centres. The entire auction process, including allotment, determining and communicating payments, and advising successful and rejected bids to bidders, would be line. The list of successful and the consideration payable would form the input to the settlement and servicing system."

The deputy governor, however, made a mention of the fact that while these link up has advantages, it can be made operational through electronic SGL transfer forms. "Early enactment of the new Government Securities Act replacing the Public Debt Act (1944), is essential since it will provide Reserve Bank with substantive powers to design and introduce electronic SGL transfer forms," Reddy said.

Later, taking part in a panel discussion, Reserve Bank's Internal Debt ManagementCell chief general manager, Usha Thorat, said that the market was still not prepared for a self-regulatory status. "Integration in the domestic market will take place only after a proper asset-liability system is in place, legal reforms have taken place and regulatory issues solved," Thorat said.