Source: ET
Context:
The Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) are in discussions to introduce corporate bond index derivatives, aiming to enhance trading activity in corporate debt securities.
Key Highlights:
SEBI cleared the way for Cash-Settled Corporate Bond Index Futures (CBIF) in January 2023 for corporate debt securities rated AA+ and above. Talks with RBI aim to reinvigorate this initiative.
Cash-Settled Corporate Bond Index Futures (CBIF)
- CBIF are derivative contracts based on a corporate bond index, allowing investors to take positions on the performance of a basket of high-quality corporate bonds.
- Cash-settled: No physical delivery of bonds occurs; settlements are made in cash based on the difference between contract price and the final index value at maturity.
Eligibility Criteria:
- SEBI allows CBIF contracts only on indices comprising corporate bonds rated AA+ and above.
Purpose & Significance:
- Provides investors with a tool to hedge interest rate risk and credit risk in corporate bonds.
- Helps improve liquidity and participation in the corporate bond market.
- Supports price discovery and strengthens India’s debt market infrastructure.
Regulatory Context:
- SEBI cleared CBIF in January 2023 for launch by stock exchanges.
- Discussions with RBI aim to revive and promote trading in these contracts to deepen India’s corporate debt market.
