PROCEDURE FOR THE RETAIL OF SMALL DENOMINATED TREASURY BILLS

1.0
BACKGROUND

1.1       Pursuant to the mandate of Sec. 129 of R.A. No. 7653 to
phase out the fiscal agency functions of Bangko Sentral ng Pilipinas
(BSP) and transfer the same to the Department of Finance (DOF), the
latter designated the Bureau of the Treasury (BTr) to be the Fiscal
Agent of the National Government.

1.2       Further, pursuant to DOF Circular 141-95, the issuance
and servicing of government securities was also transferred to BTr.

1.3       Henceforth, the investments/placements of investors in
Small Denominated Government Securities (SDGS) shall be transacted with
BTr.

2.0
PARTICIPANTS and their ROLES, DUTIES and OBLIGATIONS

2.1       BUREAU of the TREASURY (BTr)

A.        The BTr shall issue the SDGS on a TAP basis, price
based on the Weighted Average Yield Rate of the last weekly auction.

B.        The BTr shall be responsible in maintaining a fully
scripless registry for government securities under the Small Investor s
Program.

C.        The BTr shall implement a fully electronic environment
to cover the entire range of activities related to the issue, sale,
service. retirement and redemption of government securities.

D.        The BTr shall secure the necessary budgetary support for the implementation of Small Investor’s Program.

E.        The BTr agrees to provide the backroom support for the
SDGS. Backroom shall cover: (a) recording the purchase or sale
transaction; (b) the transfer of ownership of such securities; (c)
servicing of interest payments, amortization and redemption of
principal; and (d) maintenance of securities accounts ledgers denoted by
numbered accounts to ensure maximum investors confidentiality.

F.         The BTr shall authorize the necessary interfaces to
its RoSS to enable the SIP Retailing Platform Services to function
effectively and efficiently.

G.        The BTr shall be responsible for accrediting the
agents and appointing settlement bank/s for the SIP. The BTr shall, in
accordance with existing rules and regulations, adopt procedures for
such accreditation and appointment.

H.        The BTr shall issue SDGS corresponding to the amount
stated on the individual purchase orders and credit the investor’s RoSS
account upon receipt of confirmed purchase orders.

I.          The BTr shall issue a confirmation of the transfer of government securities.

2.2       SETTLEMENT BANKS (SB/s)

A.        The SB/s shall open a settlement account for the investor who deposits funds with them for the SIP.

B.        The SB/s shall log on to BTr to create a RoSS account number for the investor.

C.        The SB/s shall provide BTr with the necessary
information to facilitate the development of the settlement bank-related
function within the SIP Retailing Platform for account opening and
maintenance.

D.        The SB/s shall process instructions from BTr based on
the orders submitted by Licensed and Accredited Agents. It shall only
process those investor accounts with sufficient funds for the amount
corresponding to the purchase order and credit BTr’s settlement account.

E.        The SB/s shall accept or deny the instruction of BTr
to debit the account of the investor and credit the account of BTr for
investment in SGDS.

2.3       E-COMMERCE SERVICE PROVIDER (ECSP)

A.        The ECSP shall provide the Secure Trading Platform
(STP) that will link the agents in the field, the settlement bank and
the Bureau of the Treasury.

B.        The ECSP shall maintain a secure and confidential platform that will deliver the following:

(1)   Settlement account facility.
(2)   Acquisition of purchase order.
(3)   Submission of queued purchase orders to the settlement bank for authorization.
(4)   Submission of authenticated and authorized issuance instructions to BTr.
(5)   Trade confirmation messages for agents for their clients.
(6)   Account balance inquiry.
(7)   Market information.

2.4       AGENTS

A.        Agents shall use the STP Platform to submit purchase orders for authentication and authorization.

B.        Agents shall take purchase orders from investors.

C.        Agents shall allow the investors to use the STP Platform to query the following using a PIN:

(1)   Trade confirmation
(2)   RoSS account balance
(3)   Market information (i.e. current prices, closing prices, yield curve)

D.        Promotion of SGDS under the SIP.

E.        Solicit orders from clients for which the agent shall
be entitled to distribution fee of not more than 0.50% of investor’s
yield.

3.0
PROCEDURES

Any investor who desires to purchase SDGS shall subscribe to the following procedure:

3.1    The investor deposits money/funds with the settlement bank.
3.2    Settlement bank opens a settlement account and then logs on
to create a RoSS account number which shall confidentially be provided
to the investor.
3.3    The investor keys in his PIN number.
3.4    The investor goes to an authorized agent to execute a purchase.
3.5    The authorized agent submits the purchase order to the BTr-RoSS.
3.6    The BTr queries the settlement bank (SB) for sufficiency of
funds as basis to accept or deny the purchase order (PO).
3.7    If the account of the investor is sufficient, SB electronically confirms the sufficiency of funds.
3.8    BTr instructs SB to debit the account of the investor and credit the account of TOP.
3.9    BTr issues the securities and confirms the transfer.

4.0
MANNER OF SETTLEMENT

Clearing and settlement will be on a delivery — versus — payment
basis which will be achieved through the use of an electronic platform
provided by an E-Commerce Service Provider.

This Circular shall take effect immediately.

Adopted: 4 Nov. 1998

(SGD.) EDGARDO B. ESPIRITU
Secretary of Finance