Effectiveness and Efficiency of Debt Capital Markets – A Comparative Study Transactions Costs and Timing for Issuance, Listing and Trading of Locally Issued Debt Securities Final Report February 2020 Effectiveness and Efficiency of Debt Capital Markets – A Comparative Study This project is supported by the . 2 Effectiveness and Efficiency of Debt Capital Markets – A Comparative Study In order to provide a fair and comprehensive comparison, the data shown in this report references calendar year 2018. This report may be updated to reflect changing market conditions in due course. 3 Effectiveness and Efficiency of Debt Capital Markets – A Comparative Study Table of Contents 1. Executive Summary ........................................................................................................................................... 8 2. Introduction....................................................................................................................................................... 11 2.1. Purpose of this Report .......................................................................................................................... 11 2.2. Benchmarking & Comparison Framework ....................................................................................... 11 2.3. Model Portfolio ....................................................................................................................................... 12 2.4. Model Issuer ............................................................................................................................................ 13 2.5. Getting the Most from this Report ..................................................................................................... 13 3. Market Dynamics ............................................................................................................................................. 15 3.1. Bond Yields .............................................................................................................................................. 15 3.2. Listing Requirements ............................................................................................................................. 17 3.3. Size of Bond Market ............................................................................................................................... 18 3.4. Bond Market Trading ............................................................................................................................. 19 4. Primary Market ................................................................................................................................................. 22 4.1. Government Bond Auction Type and Frequency ........................................................................... 22 4.2. Government Bond Auction Costs ....................................................................................................... 24 4.3. Corporate Bond Issuance Structure .................................................................................................. 25 4.4. Corporate Bond Issuance Fees ........................................................................................................... 26 5. Secondary Market ............................................................................................................................................ 30 5.1. Trading Systems ...................................................................................................................................... 30 5.2. Indirect Costs - Spreads ........................................................................................................................ 31 5.3. Trading Transaction Fees ..................................................................................................................... 34 6. Settlement and Safekeeping ......................................................................................................................... 36 6.1. Settlement ................................................................................................................................................ 36 6.2. Safekeeping.............................................................................................................................................. 37 7. Taxation .............................................................................................................................................................. 39 7.1. Transaction Taxes ................................................................................................................................... 39 7.2. Withholding Taxes .................................................................................................................................. 39 7.3. Taxes on Disposal / Sale ....................................................................................................................... 40 8. Ranking and Fee Analysis ............................................................................................................................... 41 8.1. Ranking ..................................................................................................................................................... 41 8.2. Portfolio Cost Analysis ........................................................................................................................... 43 9. Federation of Bosnia and Herzegovina Factsheet ................................................................................... 45 9.1. Overview ................................................................................................................................................... 45 4 Effectiveness and Efficiency of Debt Capital Markets – A Comparative Study 9.2. Market Dynamics .................................................................................................................................... 46 9.3. Government Bond Auction Process ................................................................................................... 47 9.4. Corporate Bond Issuance ..................................................................................................................... 48 9.5. Trading ...................................................................................................................................................... 50 9.6. Settlement & Safekeeping .................................................................................................................... 51 9.7. Taxation .................................................................................................................................................... 52 9.8. Fee Analysis .............................................................................................................................................. 52 10. Republika Srpska Factsheet ........................................................................................................................... 54 10.1. Overview ................................................................................................................................................... 54 10.2. Market Dynamics .................................................................................................................................... 55 10.3. Government Bond Auction Process ................................................................................................... 57 10.4. Corporate Bond Issuance ..................................................................................................................... 58 10.5. Trading ...................................................................................................................................................... 59 10.6. Settlement & Safekeeping .................................................................................................................... 60 10.7. Taxation .................................................................................................................................................... 61 10.8. Fee Analysis .............................................................................................................................................. 61 11. Bulgaria Factsheet ........................................................................................................................................... 63 11.1. Overview ................................................................................................................................................... 63 11.2. Market Dynamics .................................................................................................................................... 64 11.3. Government Bond Auction Process ................................................................................................... 66 11.4. Corporate Bond Issuance ..................................................................................................................... 67 11.5. Trading ...................................................................................................................................................... 69 11.6. Settlement & Safekeeping .................................................................................................................... 70 11.7. Taxation ...................................................................................................................................................