Corporate bonds and Government securities as collateral
Summary
This SEBI circular permits Foreign Institutional Investors (FIIs) to use corporate bonds and government securities as collateral for transactions in both cash and F&O segments. Clearing corporations must ensure these bonds meet specific criteria, including a minimum AA rating, dematerialized form, and a haircut of at least 10%. Stock Exchanges and Clearing Corporations are directed to amend their rules and report on the implementation status.
Text
henceforth FIIs are permitted to offer the following collaterals - government securities, corporate bonds, cash and foreign sovereign securities with AAA ratings, for their transactions in both cash and F&O segments.
The bonds shall have a rating of AA or above (or with similar rating nomenclature) by recognised credit rating agencies.
The bonds shall be in dematerialized form.
The bonds shall be treated as part of the non-cash component of the liquid assets of the clearing member and shall not exceed 10% of the total liquid assets of the clearing member.
To begin with the haircut shall be a minimum of 10%.
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/clearing members of the Exchange/Clearing Corporation and also to disseminate the same on the website.
communicate to SEBI, the status of the implementation of this circular in the Monthly Development Report.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contracts (Regulation) Act, 1956.
Source: SecMarx — Corporate bonds and Government securities as collateral. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.