Aims to reduce costs and increase transparency
MUMBAI: After being declared as the regulator for corporate bonds trading in January 2007, Securities and Exchange Board of India (Sebi) is now in the process of simplifying the procedure for debt issuances.
The regulator is trying to reduce costs and increase transparency in the corporate bond market by introducing an electronic trading platform.
“Sebi has examined and is in the process of granting permission to eligible entities for setting up of electronic systems to facilitate price discovery and bringing about transparency into corporate bond trading,” the regulator stated in a circular on Tuesday.
The systems will help display buy/sell quotes and evaluate credit risks of counter parties involved so that the buyers and the sellers in the corporate bond market could strike deals at best prices before they go in for order matching either at the exchange or bilaterally.
Sebi said it had already received assurances from both the BSE and the NSE on availability of risk free clearing and settlement systems and their readiness to provide facilities to the market participants to undertake repos in
corporate bonds before RBI is approached in the matter.
The multiple regulators - the government, the Reserve Bank of India and the Sebi - for corporate bonds had been hampering the growth of the market. Realising the same, the roles were segregated after recommendations from by a high-level expert committee.
Following the role identification among the regulators, the bond market has grown after the corporate bond trading platforms of BSE and NSE were made operational in July this year. Sebi chief M Damodaran said, “Bonds are worldwide an OTC phenomenon.
But, even on the exchanges we are seeing higher number of bonds being traded.”
At end September 2007, as per information collected from the BSE and the NSE, primary issuances by corporates in the form of private placement during the current fiscal stood at Rs 68,457 crore, while the secondary market trades (both OTC and exchanges) stood at Rs 41,925 crore.
