SEBI introduces new steps to increase liquidity in corporate bond mkt

Informist, Friday, Jun 2, 2023

MUMBAI – In order to increase liquidity in the corporate bond market, the Securities and Exchange Board of India in a circular today introduced new steps on trades in corporate bonds done through request for quote platform by brokers.

For all trades in proprietary capacity, stockbrokers should undertake at least 10% of their total secondary market trades by value in corporate bonds in that month by seeking quotes through one-to-one or one-to-many mode on the request for quote platform. This will come into force from Jul 1.

Later, brokers will have to undertake at least 25% of their total secondary market trades by value in corporate papers, which will be effective from Apr 1, 2024.

The market regulator said that brokers should consider trades executed by value through one-to-one or one-to-many mode of the platform with respect to the total secondary market trades in corporate bonds during the current month and immediate preceding two months on a rolling basis.

According to SEBI, only trades pertaining to proprietary capacity of brokers will be considered for the purpose of such calculations.

Following are certain directions given to stock exchanges by SEBI:

a) Bring the provisions of this circular to the notice of their members and also disseminate the same on their websites.

b) Make amendments to the relevant bye-laws, rules and regulations for the implementation of the provisions.

c) Communicate to SEBI on the status of the implementation of the provisions of the circular in their monthly development report.

d) File compliance report from August onwards with the Department of Debt and Hybrid Securities.

This has come as the regulator from Jan 1 allowed registered stockbrokers to place bids on the request for quote platform on behalf of their clients, apart from placing bids in a proprietary capacity.

In February 2020, request for quote platform was launched in order to bring transparency in the execution and settlement of trades in debt securities.

Request for quote platform is an electronic platform that enables multilateral negotiations to take place on a centralised online trading platform that provides market participants the option to seek and respond to quotes, and maintain an audit trail of all details of the interactions, including the quoted yield, mutually agreed price, and terms of the deal. End

Reported by Subhana Shaikh

Edited by Deepshikha Bhardwaj

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Source: Cogencis