Planning to boost Liquidity and Transparency
The Securities and Exchange Board of India(SEBI) wants companies bonds to undergo trade on exchange platforms in a similar manner as stocks and government securities are traded. It is focusing on the development of the Corporate Bond Market. The motive is for the creation of demand for a range of such securities.
NSE and BSE are responsible for operations related to corporate bond platforms but these are just the systems that report corporate bond deals. SEBI is in search of a stage that does order matching which is similar to stocks and govt. securities. Currently, most of the trades which take place on the corporate bond market are decided through the phone. SEBI also wants to ensure guaranteed settlement of trades and regularise the process of trade execution which is also known as ‘trade through processing’.
An official of the regulator said that an automatic order-driven system and seamless settlement will bring transparency and liquidity inside the corporate bond market. This order was discussed in the Mutual Fund Advisory Committee(MFAC) which is appointed by SEBI. An expert working group led by Ananth Narayan, a Finance professor at SP Jain Institute of Management and A Balasubramaniam, CEO, Aditya Birla Sun Life for the opinion brainstorming.
Ajay Tyagi, Chairman, SEBI earlier said that in these difficult times of COVID, the need for having a liquid bond market has become a necessity. The Franklin Templeton fiasco could be responsible for the urgent solution for easing the crisis in corporate bonds. Franklin announced shutting of six debt schemes and withheld withdrawals indefinitely as the company struggled to sell its illiquid lowly rated papers.
Earlier, SEBI was concerned over the upsurge of the retail activities of the stock market even when due to COVID-19 pandemic, many have lost their jobs or suffered a pay cut. Ajay Tyagi was also not firm with allowing various companies to combine their first and second quarter results as this would lead to speculation in the market. There came a possibility where analysts, media houses and investors may get abstract information.
SEBI wants to transform the corporate bond stage as per the terms of Negotiated Dealing System-Order Matching(NDS-OM) for the issue and trade of government securities and State Development Loans.