Sebi allows trading platforms for corp bonds

The Securities and Exchange Board of India has allowed the Bombay Stock Exchange and the National Stock Exchange to set up trading platforms for corporate bonds with effect from July 1.

The Securities and Exchange Board of India Sebi has allowed the Bombay Stock Exchange BSE and the National Stock Exchange NSE to set up trading platforms for corporate bonds with effect from July 1. According to the Sebi, the minimum trading value for corporate bonds for all entities has been reduced to Rs 1 lakh from the existing Rs10 lakh. The stock exchanges may also have a limited segment for transactions in smaller market lots. The actual or actual day count convention applicable for government securities would be mandatory for all new bond issues.

The Sebi move follows the Union Budget announcement for developing an exchange traded market for corporate bonds. It would enable efficient price discovery and reliable clearing and settlement in a gradual manner, Sebi said.

The trade matching platform would be an order-driven one with essential features of an over-the-counter OTC market. The BSE and NSE would make use of their existing infrastructure, with necessary modifications, to set up the trading platform. The trade matching platform would be available to members of the respective stock exchanges. In the first phase of implementing the Union Budget proposals for developing an exchange traded market for corporate bonds in December 2006, Sebi authorised the BSE and the NSE to set up and maintain corporate bond reporting platforms to capture all information related to trading in corporate bonds as accurately and as close to execution as possible. In the second phase of development, it has been decided to permit the BSE and the NSE to have in place corporate bond trading platforms to enable efficient price discovery and reliable clearing and settlement in a gradual manner.

On stabilisation of the trade matching system, the BSE and the NSE may move to an anonymous order matching system for trading of bonds within an appropriate period of time. 8220;Both exchanges will indicate to Sebi an expected date on which they could move to anonymous order matching system for trading in corporate bonds. Such anonymous order matching system shall be implemented on the following lines,8221; Sebi said.