Screen-based G-Secs Trading On Bourses On The Cards

Mumbai, October 29: | Updated: Oct 30 2002, 05:30am hrs
The Reserve Bank of India (RBI) has proposed to introduce anonymous screen-based order driven trading in government securities (G-Secs) on the stock exchanges. The scheme, which will follow accepted best practices relating to trading and settlement, is being worked out jointly with Sebi.

In another move the apex bank has allowed banks and financial institutions (FI) to issue certificates of deposit (CD) on a floating rate basis provided the methodology of computing the floating rate is objective, transparent and market-based. This is a very good move specially on long-term CDs. While retail investors have never been comfortable with floating rates, bulk players are likely to have a favourable outlook towards it, Development Credit Banks treasury head, Harihar Krishnamoorthy said.

The RBI will soon come out with guidelines on uniform accounting norms for repo transactions, draft guidelines on the same were circulated to banks and fixed income, money markets and Derivatives Association of India for their comments. The RBI has also proposed to extend repos eligibility to a select category of non-SGL account-holders, with adequate safeguards, to ensure delivery-versus-payment (and transparency).

The RBI has also extended repos to all regulated entities with gilt/CSGL accounts as long as all transactions are mandatorily reported and settled through the delivery-versus-payment mechanism.

Further, RBI has proposed to allow rollover of repos contracts using the same securities between the same counterparties.

The RBI also intends to allow sale of securities purchased under repos, widen the repos market to all entities including corporates and extend the eligibility to all debt instruments including corporate bonds at a later date. These are welcome measures in the right direction and are likely to give the market further impetus, commented Standard Chartered Banks regional head (global markets), MA Ravi Kumar.

In another initiative for the money markets, the RBI said that the collateralised borrowing and lending obligation (CBLO) would be considered as a money market instrument with original maturity between one day and upto one year. There will be no restrictions on the minimum denomination as well as lock-in period for its secondary market transactions.