Context:
The Securities and Exchange Board of India (SEBI) has released proposals aimed at strengthening the corporate bond market, increasing market liquidity, and improving transparency.
The proposals focus on changes to the Electronic Book Provider (EBP) platform and the Request for Quote (RFQ) platform.
Proposed Changes for the EBP Platform
| Key Proposal | Current Norms | Proposed Change |
|---|---|---|
| EBP threshold for private placements | Mandatory for issue sizes over â‚ą50 crore | Lowered to â‚ą20 crore |
| EBP for InvITs and REITs | No specific requirement | Mandatory for private placements above â‚ą1,000 crore |
| Greenshoe portion | Up to 5 times the base issue size | Reduced to 3 times the base issue size |
| Settlement cycle | T+2 cycle | Move to T+1 cycle |
| Listing time | T+3 days | Reduced to T+2 days |
| Bidding process for large issues | Not mandatory | Mandatory open bidding for issues over â‚ą1,000 crore |
An RFQ (Request for Quote) platform is an electronic platform where investors can request quotes from multiple dealers to buy or sell bonds and other debt instruments, facilitating a more transparent and efficient trading process.
Proposed Changes for the RFQ Platform
- Yield-to-price computation for non-convertible securities will now align with government securities methodology.
- Cash flow dates for interest/dividend/redemption will be based on the scheduled due date and not adjusted for day count convention.
- This aims to simplify trading and reduce calculation complexities on the RFQ platform.
Impact of Proposed Changes
- Lowering the threshold for EBP will bring more corporate bond issues under transparent bidding.
- Faster settlement cycles (T+1) and quicker listing timelines (T+2) will increase efficiency.
- Mandatory open bidding for large issues is expected to improve price discovery and market depth.
- Simplified RFQ trading norms will make transactions more straightforward, especially for retail and institutional participants.
These reforms reflect SEBI’s ongoing efforts to:
- Deepen the corporate bond market.
- Encourage higher participation.
- Ensure efficient settlement and transparent pricing.
- Foster long-term growth in debt markets via streamlined and investor-friendly platforms.
