29 Sep 2026 · TAMA Insight
New Requirements for SBSN Auction Plans and Fallback Pricing in Indonesia
The Ministry of Finance has introduced changes to the regulatory framework governing the auction of State Sharia Securities (Surat Berharga Syariah Negara or “SBSN”) in the domestic primary…
The Ministry of Finance has introduced changes to the regulatory framework governing the auction of State Sharia Securities (Surat Berharga Syariah Negara or “SBSN”) in the domestic primary market. The amendment introduces additional requirements concerning the information that must be included in an SBSN auction plan and establishes a specific fallback mechanism for determining the price of non-competitive purchase offers where no competitive offers are submitted.
The changes are relevant to banks, securities companies acting as primary dealers, Bank Indonesia, the Deposit Insurance Corporation (Lembaga Penjamin Simpanan), and other eligible participants in the domestic SBSN auction market. They also provide greater clarity on the relationship between the initial auction and any subsequent additional SBSN auction.
New Mandatory Contents of the SBSN Auction Plan
Under the amended regulation, the Director General, on behalf of the Minister of Finance, must determine an SBSN auction plan before the auction is conducted. The auction plan serves as the formal basis for the implementation of the auction and must contain more detailed information than previously required.
The auction plan must specify the SBSN series to be offered, the currency, the underlying Islamic contract (akad), the maturity date, and the auction date. It must also state the indicative target, the method used to determine the SBSN price, the percentage allocation for non-competitive purchase offers, and the SBSN assets underlying the issuance.
Two additional items are now expressly required: the maximum target amount and the settlement date.
The maximum target amount establishes the upper limit of the SBSN issuance that may be awarded in connection with the relevant auction cycle. This is distinct from the indicative target, which functions primarily as an indication of the Government’s intended financing amount. The maximum target therefore provides a more definite ceiling for the amount that may ultimately be issued.
The settlement date, meanwhile, specifies when the successful bidders are required to settle their purchase and when the SBSN are delivered through the relevant securities accounts. Including the settlement date as part of the auction plan gives participants advance certainty regarding the timing of their funding and settlement obligations.
The complete auction plan must be announced no later than two working days before the auction date. This provides market participants with advance information on the principal parameters of the auction and allows them to prepare their bids and liquidity arrangements accordingly.
New Fallback Pricing Mechanism for Non-Competitive Offers
The amendment also introduces a specific mechanism for determining the price of SBSN allocated through non-competitive purchase offers.
Where competitive purchase offers are submitted, the price applicable to non-competitive purchase offers continues to be derived from the results of the competitive auction. Where the multiple-price method is used, the relevant price or yield is based on the weighted average price or weighted average yield resulting from the successful competitive bids.
The amendment addresses a situation that previously could create uncertainty: an auction in which no competitive purchase offers are submitted.
Where there are no competitive purchase offers, the price applicable to non-competitive purchase offers must instead refer to the prevailing market yield level in accordance with the Yield/Reference Price Guideline established by the Director General.
This creates an express fallback mechanism for circumstances in which no competitive auction result is available to serve as the pricing reference. The regulation therefore no longer depends exclusively on the existence of competitive bids to establish the price for non-competitive allocations.
The requirement to use the Yield/Reference Price Guideline also establishes an ex-ante reference for determining the applicable market yield. This provides a defined basis for the pricing decision and reduces uncertainty where an auction does not generate competitive price discovery.
Maximum Target and Additional SBSN Auctions
The introduction of the maximum target amount is also connected to the framework governing additional SBSN auctions.
An additional SBSN auction may be conducted to meet State Budget financing needs where the maximum target amount established for the initial auction has not been fully achieved. The additional auction is therefore linked directly to the remaining capacity within the maximum target established in the original auction plan.
The additional auction must be conducted one working day after the initial auction. This creates a defined timeframe for the Government to utilize the remaining amount available up to the maximum target rather than leaving the timing of additional issuance open-ended.
The maximum target consequently operates as an overall ceiling for the relevant auction cycle. The mechanism provides a clearer distinction between the Government’s indicative financing objective and the maximum amount that may ultimately be issued through the initial and additional auction arrangements.
For auction participants, this means that the maximum target announced before the auction becomes an important parameter in assessing the potential size of the issuance and the possibility of an additional auction on the following working day.
Pricing and Allocation in Additional SBSN Auctions
The amendment also clarifies how bids are handled in an additional SBSN auction.
Bids submitted in the additional auction are made in the form of non-competitive purchase offers. Their pricing is based on the weighted average price or weighted average yield resulting from the successful bids in the initial SBSN auction.
The additional auction therefore does not constitute a new round of competitive price discovery. Instead, the pricing established through the initial auction serves as the reference for the additional issuance.
The settlement price for successful participants in the additional auction is determined using a uniform price method based on the clean price derived from the weighted average yield established in the initial auction.
This approach creates a direct pricing link between the initial auction and the additional auction. The additional issuance therefore remains within the pricing framework established through the initial market process rather than creating an independent pricing mechanism.
Settlement Date and Market Infrastructure
The express inclusion of the settlement date in the SBSN auction plan also strengthens the connection between the Ministry of Finance’s auction framework and the operational settlement infrastructure for government securities.
By specifying the settlement date in advance, successful bidders can determine when the purchase price must be available and when the SBSN will be delivered. This is particularly relevant for institutional participants that must coordinate their liquidity, securities accounts, and settlement arrangements.
The approach also promotes consistency between the SBSN auction framework and the broader government securities market infrastructure administered through Bank Indonesia and other relevant market institutions.
Implications for SBSN Auction Participants
The amendments primarily affect the transparency and operational certainty of the SBSN auction process.
For prospective bidders, the auction announcement will provide a more comprehensive set of parameters, including not only the indicative financing target but also the maximum target and settlement date. Participants can therefore distinguish between the Government’s indicative financing objective and the maximum amount that may be issued.
The fallback pricing mechanism is also relevant for participants submitting non-competitive purchase offers. Where competitive bids are available, the applicable price continues to be linked to the competitive auction results. Where no competitive bids are submitted, however, the applicable price will instead be determined by reference to the market yield level under the Director General’s Yield/Reference Price Guideline.
For the Government, the framework provides a more structured mechanism for managing an auction where competitive price discovery is absent and for conducting an additional auction where the maximum target has not been reached.
Broader Regulatory Context
The changes should be read together with the broader legal framework governing SBSN issuance and the domestic government securities market. SBSN remain subject to the statutory framework governing State Sharia Securities, including requirements concerning their underlying assets, Islamic contracts, issuance, and settlement.
The amended auction framework does not change the fundamental nature of SBSN as State Sharia Securities. Rather, it refines the procedures for conducting domestic primary market auctions by establishing more detailed auction parameters, a defined pricing fallback, and clearer conditions for additional issuance.
The combination of a mandatory maximum target, a specified settlement date, and a fallback pricing mechanism provides greater procedural clarity for auctions where competitive bidding may be limited. It also establishes a clearer relationship between the initial auction, any additional auction, and the pricing and issuance limits applicable to the relevant auction cycle.
This development is relevant for financial institutions, primary dealers, investors, and other participants involved in the domestic SBSN market. Market participants should review the auction parameters announced for each SBSN offering, particularly the maximum target, settlement date, pricing method, and applicable reference for non-competitive offers, when preparing for participation in future auctions.
This alert forms part of a series examining recent developments in Indonesia’s government securities and financial regulatory framework. As the amended rules introduce more detailed requirements for SBSN auctions and establish a new pricing mechanism for circumstances where competitive offers are absent, their practical application should be monitored by participants involved in the domestic primary market. Please feel free to contact us should you wish to discuss these developments further.
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