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SEBI/CBM/BOND/2/2007/13/04 The Managing Director / Executive Director / Administrator Of All Stock Exchanges Dear Sirs, Sub: Corporate Bond Market –
Launch of Trading Platform I.
SEBI vide circulars No.SEBI/MRD/SE/AT/36/2003/30/09 dated II.
In the first phase of implementing the Union Budget proposals for developing
an exchange traded market for Corporate Bonds, SEBI vide circulars No. SEBI/ CFD/DIL/BOND/1/2006/12/12
dated III.
In the second phase of development, it has been decided to permit BSE
and NSE to have in place corporate bond trading platforms to enable efficient
price discovery and reliable clearing and settlement in a gradual manner. To
begin with, the trade matching platform shall be order driven with essential
features of OTC market. Eventually, a system of anonymous order matching shall
be established. IV.
The order driven trade matching platform for listed corporate debt
securities shall be implemented by BSE and NSE with effect from 1.
BSE
and NSE may make use of the existing infrastructure available with them for operating
the trade matching platform for corporate bonds, with necessary modifications. 2.
In
the initial stage of usage of the trade matching platforms, the system shall
retain the essential features of the OTC market. 3.
Orders
executed through trading platforms of either BSE or NSE shall not be required
to be reported again on the reporting platforms. 4.
All
investors including banks who are desirous of using the trading platform of BSE
or NSE shall deal through stock brokers registered with SEBI for their
transactions thereon. Respective regulators accordingly have been requested to
issue necessary instructions to all entities regulated by them. 5.
At
the option of the participants, they will also be allowed to undertake Over the
Counter transactions. Such Over the Counter transactions shall continue to be
reported on the reporting platforms. 6.
The
trading platforms shall be available from 7.
The
entities trading in listed corporate debt securities may settle their trades
bilaterally between them. They may also use the services of the stock exchanges
for clearing and settlement. 8.
BSE
and NSE shall ensure that the shut period in corporate bonds shall be reduced
and aligned to that applicable for Government Securities within a reasonable
period of time. 9.
All
entities including Qualified Institutional Investors (QIBs), shall trade in
corporate bonds subject to a minimum value of Rs.1 lakh. Exchanges may also
have a limited segment for transactions in smaller market lots. 10. The Actual/Actual day count
convention, presently followed for dated Government Securities, shall be
mandatory for all new issues of corporate bonds. For existing bonds, the
existing terms may be observed unless agreed to by issuers and holders. V.
On stabilization of the trade matching system, BSE and NSE may move to
an anonymous order matching system for trading of bonds within an appropriate
period of time. Both the stock exchanges will indicate to SEBI an expected date
on which they could move to anonymous order matching system for trading in
corporate bonds. Such anonymous order matching system shall be implemented on
the following lines: 1.
With
the introduction of anonymous order matching platform, the clearing and
settlement facility shall be provided by BSE and NSE with a multilateral
netting facility for trades executed on the platform. The systems used for the
purpose shall be designed to ensure that they are fair, effective and efficient
and that they reduce systemic risk. 2.
BSE
and NSE shall devise an appropriate system of margining for trades done on the
platform. 3.
BSE
and NSE may either fully or partially engage the services of entities providing
technical support for trading in corporate bonds. Where such service provides
are engaged, the concerned stock exchange shall be responsible for the
execution of trades and clearing and settlement thereon. 4.
The
conditions mentioned at point numbers 3, 4, 5, 6, 8, 9 and 10 of para IV above
shall, as far as may be, apply to the anonymous order matching system. VI.
Amendments to the listing agreement for
debentures In order to facilitate development of a vibrant market in corporate debt
instruments, it has been decided to further amend the listing agreement for
debentures issued by circular No. SEBI/ CFD/ DIL/ CIR- 39 /2004/ 11/ 01 dated 1.
In
clause 1.4, for sub-clause (c), the following sub-clause shall be substituted,
namely: “The issuer agrees to ensure that services of ECS (Electronic Clearing
Service), Direct Credit, RTGS (Real Time Gross Settlement) or NEFT (National
Electronic Funds Transfer), are used for payment of interest and redemption
amounts as per applicable norms of the Reserve Bank of 2.
In
clause 1.6, after sub-clause (g), the following sub-clause shall be inserted,
namely: “The issuer agrees that no material modification shall be made to the
structure of the debenture in terms of coupon, conversion, redemption, or
otherwise without prior approval of the stock exchanges where the bond is
listed.” The stock exchange shall also ensure that such information relating to
modification or proposed modification is disseminated on the exchange website. VII.
Applicability The trading platforms may be used for executing all trades in listed
debt securities issued by all institutions such as Banks, Public Sector
Undertakings, Municipal Corporations, bodies corporate and companies. VIII.
Direction to Stock Exchanges BSE and NSE are directed to: a.
Make
necessary amendments to the listing agreement, bye- laws, rules and regulations
for the implementation of the above decision immediately, as may be applicable
and necessary. b.
Bring
the provisions of this circular to the notice of the entities in both equity
and debt segments, member brokers, clearing members of the Exchange and also to
disseminate the same on the website for easy access to the investors; and c.
Communicate
to SEBI, status of the implementation of the provisions of this circular in the
next Monthly Development Report. IX.
This circular is issued in exercise of powers conferred by sub-section
(1) of Section 11 of the Securities and Exchange Board of India Act, 1992, to
protect the interests of investors in securities and to promote the development
of, and to regulate the securities market. The provisions of the earlier circulars No.SEBI/MRD/SE/AT/36/2003/30/09
dated X.
This circular is available on SEBI website at www.sebi.gov.in. Yours faithfully, Satya Ranjan Prasad |
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