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According to SEBI, the new standard which will come into effect on January 1, 2023 should result in increased participation by the general public as well as a deepening of the secondary market for corporate bonds.
Capital markets regulator SEBI on Thursday, October 20, said it had allowed registered stockbrokers in the debt segment of stock exchanges to place or seek bids on the quote request platform. (RFQ) on behalf of customers, in addition to the existing option. to bid on an exclusive basis.
According to the Securities and Exchange Board of India (SEBI), the new standard which will come into effect on January 1, 2023 is expected to result in increased participation by the general public as well as a deepening of the secondary market in corporate bonds.
RFQ is an electronic platform that allows multilateral trading to take place in a centralized online trading platform with straight-through clearing and settlement processing to complete trades.
In February 2020, in line with SEBI approvals, the National Stock Exchange of India Ltd and BSE Ltd launched RFQ platforms, as an extension of their existing trade execution and settlement platforms, to bring transparency in “over-the-counter” transactions in companies. bonds, which were negotiated bilaterally.
The platform provides participants with a range of options to seek a quote and respond to a quote, while maintaining an audit trail of all interactions i.e. quoted yield, mutually agreed price , the terms of the agreement, etc. Quotes are negotiated bilaterally between counterparties.
Currently, the RFQ platform operates as a participant-based model, in which all regulated entities, listed legal persons, institutional investors and all Indian financial institutions are eligible to register, access and transact.
To improve liquidity on exchanges’ RFQ platforms, SEBI has mandated registered mutual funds and portfolio management services to undertake a specified percentage of their total secondary market trades in corporate bonds through the platform. RFQ form of scholarships.
IRDAI has also prescribed similar stipulations for insurers. Since its introduction, the percentage of RFQ transactions compared to total bond market transactions has increased and is now around 30%.
The regulator has received representations from market participants to allow securities dealers to place bids on behalf of their clients to facilitate broader participation in the corporate bond market. Therefore, it was decided to allow stockbrokers to place bids on the RFQ platform.
(Edited by : Shoma Bhattacharjee)