On Monday, June 30th, the Housing Financing Fund (HFF) signed agreements regarding HFF bond issuance and market making in the secondary market. The objective of the agreements is to enhance HFF´s access to funding and strengthen price formation in the secondary market.
As of July 1st, 2014, four financial institutions are authorized to refer to themselves as „Primary Dealers in HFF bonds”; Íslandsbanki hf., Arion banki hf., Landsbankinn hf. and MP Bank hf.
The following topics describe the content of the agreement:
- Primary Dealers have exclusive rights to submit bids at HFF auctions.
- Primary Dealers have exclusive access to HFF´s Securities Lending Facilities.
- Primary Dealers are obligated to submit bids at each auction for ISK 750 million at market value.
- A Primary Dealer is a market maker in the secondary market for all HFF bonds and submits a minimum bid at nominal value for each bond series at Nasdaq OMX in Iceland as follows:
| Class | Nominal Value |
| HFF150224 | 80.000.000 |
| HFF150434 | 70.000.000 |
| HFF150644 | 65.000.000 |
- A Primary Dealer is obligated to keep the maximum spread between bid and ask quotes as specified in the agreements.
- A Primary Dealer is required to renew his/her offers within ten minutes after they have been accepted. If the Primary Dealer’s total transaction in one series during that day equals ISK 500 million at nominal value, the Primary Dealer is entitled to diverge from the maximum spread requirement for that particular series for the remainder of that day.
- The agreement is valid from July 1st, 2014 to June 30th, 2015. Total compensation paid to all Primary Dealers is ISK 100 million during the term of the agreement for market making in the secondary market and receive a 0.12% commission for accepted bids in HHF bond auctions.
A sample agreement is attached, providing comprehensive information on the Primary Dealer’s rights and obligations.
