The Securities & Exchange Board of India (Sebi) is preparing a slew of major initiatives to kickstart the moribund corporate bond market, and will put out a detailed notification on the matter soon. Sebi and the Reserve Bank of India (RBI) are also on the verge of an agreement on starting repos in corporate bonds. Major changes are also proposed in the corporate bond market to ensure robust trading and settlement.
Sebi had earlier written to the apex bank seeking permission to start corporate bond repos. Among the conditions set by RBI were large volumes, straight-through processing, a robust clearing & settlement system and delivery versus payment mechanism. A top Sebi official told FE: ?We will now respond to RBI, saying these conditions are about to be met. That should pave the way for corporate bond repos.?
The Sebi notification will, apart from simplifying the procedure for corporate bond issuances by listed firms, also insist on them appointing debenture trustees. It will also mandate a transparent clearing & settlement system for such trading. Implicit in the Sebi moves is the fact that it wants over-the-counter trading to eventually move to the exchange platform.
?The move to exempt tax deducted at source for bonds traded on the exchange platform itself is proof that the push is for an exchange-traded corporate bond market,? one source explained. Sebi has already made it clear that if a firm is listed on the exchange, it would need to provide minimum disclosures for an issuance of corporate debt.
?We have also had a meeting with the stock exchanges and taken stock of the clearing & settlement preparedness for such trading,? a Sebi official added. ?The City of London and Goldman Sachs have also helped a lot,? the source said.
One issue, which Sebi is grappling with, is the gap in traded and reported figures. ?NSDL and CDSL data show that there are gaps between what is traded and what is reported. It?s only a fraction of the traded volumes that are reported. We will have to address that,? the Sebi official added.
Sebi has been keen on making major changes in corporate bond trading, particularly after the RH Patil committee recommendations and the government made it clear that a robust corporate bond market is necessary for the financial markets to take the next step.