Stories
Sebi Eyes Market Making, Bond Indices to Boost Secondary Debt Market Liquidity
- •Sebi Chairman Tuhin Kanta Pandey highlighted market-making frameworks and trading bond indices on exchanges as key measures to deepen the secondary debt market.
- •The corporate bond market is typically characterized by investors holding securities until maturity, necessitating efforts to encourage secondary-market trading.
- •Retail participation has been facilitated through online bond platforms, reducing the minimum investment to Rs 10,000 and increasing awareness.
- •Institutional investors largely hold bonds in the over-the-counter market until maturity, prompting the need for a market-making framework.
- •RBI is in agreement with allowing bond indices to be traded on exchanges, with draft guidelines already provided, aiming to diversify participants in the debt market.
Key Questions Answered
Sebi is considering a market-making framework and enabling the trading of bond indices on exchanges to boost secondary market liquidity and encourage trading. Additionally, the regulator has introduced mechanisms like the Request for Quote (RFQ) and expanded online bond platforms for retail participation.
The Reserve Bank of India (RBI) is in principle agreement with trading bond indices on exchanges and has provided draft guidelines, awaiting finalization so trading can commence.
Sebi proposed eliminating the mandatory listing requirement for outstanding unlisted NCDs for entities seeking to list debt securities. This requirement currently creates operational challenges, such as ISIN limits, covenant monitoring, and compliance costs, while disclosures remain largely similar across different debt series.
