Proposal to the Bank of Greece on the Organization of the Secondary Market for Greek State Bills, Notes, and Bonds


Nicholas Economides
Stern School of Business, New York, NY 10012
tel. (212) 998-0864, fax (212) 995-4218

Revised February 1993

Executive Summary

The Bank of Greece is advised to open a secondary market in Greek State bills, notes, and bonds. Such a market should be run by the Bank of Greece as an open electronic call market. The Bank is also advised to run the primary market for Greek State bills, notes and bonds as an ascending open-outcry single-price auction. For that purpose, the Bank of Greece is advised to create a new Division to run the primary and secondary markets. Both markets should be run by the same automated system which should also do the clearing process and run the depository of titles of bonds at the Bank of Greece. There are a number of benefits of the primary and secondary market when organized in the manner described in this proposal. They include the strengthening of public confidence in the obligations of the Greek State, the reduction of short term interest rates, additional ability of government policy to influence the short term interest rates through open market operations, the ability of the Greece State to borrow in longer durations and lower interest rates, and the general strengthening and widening of capital and other financial markets in Greece.

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