Corporate Bond Market – Launch of Trading Platform
Summary
This circular authorizes BSE and NSE to launch corporate bond trading platforms, starting with an order-driven system effective July 1, 2007. It mandates that trades occur through SEBI-registered stock brokers and establishes specific operational norms such as trading hours and settlement procedures. Additionally, it amends the listing agreement for debentures to require electronic payment mechanisms and prior exchange approval for material modifications.
Text
SEBI authorized BSE and 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.
It has been decided to permit BSE and NSE to have in place corporate bond trading platforms to enable efficient price discovery and reliable clearing and settlement in a gradual manner.
BSE and NSE may make use of the existing infrastructure available with them for operating the trade matching platform for corporate bonds, with necessary modifications.
All investors including banks who are desirous of using the trading platform of BSE or NSE shall deal through stock brokers registered with SEBI for their transactions thereon.
At the option of the participants, they will also be allowed to undertake Over the Counter transactions. Such Over the Counter transactions shall continue to be reported on the reporting platforms.
The trading platforms shall be available from 10.00 am to 5.30 pm on all trading days. BSE and NSE shall ensure that the norms on trading hours, access rights to the trading systems etc. shall broadly follow the norms presently followed in the equity segment.
The entities trading in listed corporate debt securities may settle their trades bilaterally between them. They may also use the services of the stock exchanges for clearing and settlement.
All entities including Qualified Institutional Investors (QIBs), shall trade in corporate bonds subject to a minimum value of Rs.1 lakh.
The Actual/Actual day count convention, presently followed for dated Government Securities, shall be mandatory for all new issues of corporate bonds.
With the introduction of anonymous order matching platform, the clearing and settlement facility shall be provided by BSE and NSE with a multilateral netting facility for trades executed on the platform.
BSE and NSE shall devise an appropriate system of margining for trades done on the platform.
The issuer agrees to ensure that services of ECS, Direct Credit, RTGS or NEFT, are used for payment of interest and redemption amounts as per applicable norms of the Reserve Bank of India.
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Source: SecMarx — Corporate Bond Market – Launch of Trading Platform. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.