The Sebi move follows a similar directive issued by the Reserve Bank of India (RBI) making it mandatory for all RBI-regulated entities to report transaction in these instruments on the FIMMDA platform from July 1, 2010.
The move is part of financial market regulators effort to bring in greater transparency in the CDs and CPs market. RBI had requested Sebi to implement this to ensure all trades in these instruments are reported on a common platform, said a Sebi official. FIMMDA is a voluntary market body for the bond, money and derivatives market whose members include leading banks, insurance firms and primary dealers.
Though banks, non-banking finance companies (NBFC) and corporates are the major entities which typically trade in these instruments, some of the debt market mutual funds also have exposure in these instruments. Ever since the global credit market crisis rattled the world financial markets, India's financial market regulators have been initiating steps to bring more transparency and eliminate counter party risk in the domestic system.
In October 2009, both RBI and Sebi made it mandatory for all corporate bonds traded over the counter (OTC) or on the debt segment of the stock exchanges to be cleared and settled through the National Securities Clearing Corporation Ltd (NSCCL) or the Indian Clearing Corporation Ltd (ICCL) from December 1, 2009.
Till then the trades in corporate bond market did not have a transparent settlement mechanism unlike in G-Sec where trades were settled through either NDS-order matching system or subsidiary general ledger account (SGL) system. The move was primarily intended to eliminate counter party risk.