Debt markets to shift focus to retail investors by year-end

Our Markets Bureau

Mumbai, May 22: DEBT markets, hitherto the mainstay of the institutional and wholesale investors, may see a see change by the year end, if the developments in the sector are any indication. This would see the retail investors being wooed by the players in the debt market more than ever before.

There is a three-fold move in this direction. One, the integration of the settlement system which is fast on the way; two, the setting up of the clearing corporation and legislative changes and three screen-based trading almost akin to the equity segment. All these will contribute equally to revolutionise the debt markets in India.

Currently India’s debt market is witnessing significant developments especially in terms of building up of infrastructure, which can be compared with the infrastructure available in the equity market. The Reserve Bank of India (RBI) is taking similar initiatives to create a vibrant debt market, just like the ones taken by the National Stock Exchange (NSE) in the equity market. In the process, it is finally gearing towards larger retail focus from the existing wholesale market.

All these and other related aspects of the debt market would be discussed threadbare at a two-day seminar to be held in Mumbai on May 24 and May 25. The seminar is being conducted by Business Asia Consulting.

The integration of the trading system along with the settlement will not only generate greater retail participation but will also impart transparency to the system. Today difficulty in settlements is the major reason for low retail participation in the debt market. The introduction of screen-based trading will make the market more transparent. The Negotiated Dealing Settlement, which is likely to be in place by June 2001, will enable parties to negotiate trade and report online. Improved transparency will also augment the intra-day liquidity in to market.

The second major development is the setting up of the Clearing Corporation. The Clearing Corporation, by guaranteeing the settlement, would enhance the safety of the market. At present, trades remain confined to two parties because of counterparty risks. So the setting up of the clearing corporation would expand the size of the market by enhancing the safety in the market.
Lastly the legislative changes are the urgent requirement of the day.