Review of Financial close out and Auction framework for corporate bonds traded on the Stock exchanges platform
Summary
SEBI modifies the financial close-out mechanism for corporate bond shortages to occur at the highest trade date price plus a 1% mark-up. Stock exchanges and clearing corporations are mandated to implement a uniform auction mechanism for settlement shortages by March 31, 2017. Exchanges must amend their bye-laws and notify member brokers of these changes immediately.
Text
In case of shortage of delivery, stock exchanges/clearing corporations may conduct financial close-out. The financial close out shall take place at highest price on Trade date (which becomes the trade price) with a 1% mark-up on trade price.
Further, Exchanges/Clearing Corporation shall introduce an uniform auction mechanism to deal with settlement shortages by March 31, 2017.
take necessary steps and put in place necessary systems for implementation of this circular immediately;
make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision;
bring the provisions of this circular to the notice of the member brokers of the stock exchange and also to disseminate the same on the website.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Review of Financial close out and Auction framework for corporate bonds traded on the Stock exchanges platform. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.