The Securities and Exchange Board of India (SEBI) headquarters in Mumbai. File.
| Photo Credit: Reuters
In order to increase liquidity, SEBI on Monday mandated overseas portfolio buyers (FPIs) to place not less than 10% of their trades in company bonds by the Request For Quote (RFQ) platform of inventory exchanges.
The requirement will come into drive from October 1, the Securities and Exchange Board of India (SEBI) stated in a round.
The transfer is geared toward rising the liquidity on the RFQ platform and enhancing the transparency and disclosures pertaining to investments in company bonds, which in flip will encourage funding by FPIs within the company bond section.
RFQ, which was launched on BSE and NSE in February 2020, is an digital platform that allows multi-lateral negotiations to happen on a centralised on-line buying and selling platform with straight-through processing of clearing and settlement to full the commerce. All kinds of debt securities can be found for buying and selling on the RFQ platform.
“With a view to increase liquidity on RFQ platform vis-a-vis trading in Corporate Bonds by FPIs, it is decided that FPIs shall undertake at least 10 per cent of their total secondary market trades in corporate bonds by value by placing/seeking quotes on the RFQ platform of stock exchanges, on a quarterly basis,” SEBI stated.
The regulator stated it has been taking steps to enhance the liquidity on the RFQ platform of inventory exchanges and to improve the transparency and disclosure pertaining to buying and selling within the secondary market in company bonds.
SEBI stated that it already offered an identical mandate for different intermediaries akin to different funding funds (AIFs), portfolio administration companies (PMS) and inventory brokers.
The framework got here after the capital markets regulator issued a session paper on this regard final month.
While the general company bond funding by FPIs is low, the proportion of such trades carried out on the RFQ platform is even decrease, as per the session paper.
During FY2022-23, FPIs carried out merely 4.5% of their complete trades in company bonds by the RFQ platform. Further, throughout the yr, FPIs accounted for less than 0.78% of complete trades in company bonds on the RFQ platform executed by varied entities.
