The Ghana Stock Exchange (GSE) has issued rules to facilitate and regulate the issuance, admission and trading of commercial papers on the Ghana Fixed Income Market (GFIM).
Commercial papers are typically short-term money-market securities with fixed maturities of between 15 to 270 days and which represent an issuer's unconditional promise to pay a certain sum to the order of an investor at a future date. In 2012, the Securities and Exchange Commission (SEC) issued its Guidelines for Investments in Commercial Papers dated 8 October 2012 to formally recognise commercial papers as an eligible asset class for investments by fund managers. However, in the absence of bespoke admission and trading rules for commercial papers, commercial papers have lacked secondary market depth and treasury bills have essentially monopolised Ghana's money market. It is against this backdrop that the GSE has published the Commercial Paper Issuance and Admission Rules dated February 2024 (CPRules). The CP Rules provide the:
- procedure for issuing commercial papers (including sustainability themed commercial papers);
- requirements for the admission of commercial papers on the Ghana Fixed Income Market (GFIM) for secondary trading;
- eligibility criteria and continuing admission obligations for issuers of commercial papers;
- minimum subscription, underwriting and rating requirements;
- solvency requirements for issuers;
- rollover and redemption of commercial papers;
- duties of an issuer, issuing house, sponsor, paying agent and member; and
- sanctions for non-compliance.
Given that credit to the private sector from the banking sector has weakened in recent years and the demand for more diversified investment products has grown since the completion of the Government's domestic debt exchange programme, the CP Rules could not have arrived at a more opportune time. It is expected that the CP Rules will lead to the development of a vibrant commercial paper market which meets the needs of both short-term lenders and borrowers, complements existing investment products, and augments efforts to close the financing gap in the private sector. Our firm is proud to have collaborated closely with the GSE and other stakeholders to develop the CP Rules.
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