New Delhi: With the aim of developing and strengthening the corporate bond segments, the Regulator Securities and Exchange Board of India (SEBI) are meditating on the creation of a series of “market makers”.
This is an entity that cites the purchase price and sales of corporate bonds to create liquidity in the secondary market for the bonds.
Also, the regulator is in the process of completing modalities to prepare backstop facilities to buy corporate bonds.
In addition, Sebi is considering changing the database of corporate bonds that can be accessed by all investors, SBI says in its annual report to 2020-21.
This database will provide more granular level information about the debt agreement to investors in the debt market, he added.
Very aware of the need to diversify sources to finance the need for state infrastructure, SeBi has focused his attention on creating a dynamic secondary market for investment level corporate bonds.
The regulator has launched several steps in the past to facilitate liquidity in the secondary market.
“One additional step proposed aimed at creating a series of market makers who will be present in the market most of the good time on the buying side and the sale side of the investment level corporate bonds,” Regulators said.
Sebi said it was looking for the right feasibility criteria for such market makers to ensure that financial entities financially with the necessary expertise were encouraged to participate.
Simultaneously, the problems fund inventory inventory costs this entity through various mechanisms – by placing back-to-back settings with the issuer, by making the repo market for corporate bonds that can fund market makers, among others, also being examined.
With regard to backstop facilities, along with other stakeholders including the Ministry of Finance and the Mutual Fund industry, are in the process of completing modalities to establish facilities.
Based on the proposal of SEBI, the announcement in the Union budget for 2021-22 was made in connection with the creation of backstop facilities that would buy debt securities in investment levels both in stress and normal time and help the development of the bond market.
The proposed backstop facility will function as an entity in standby and consider to facilitate liquidity in the corporate bond market and to respond rapidly to stress situations, similar to the mechanism available in the market forward globally, said Sebi.
This facility will help bring liquidity and stability to the company’s debt market, handle risk aversion during stress times especially for effects that are assessed under AAA, help build the confidence of the secondary market and create liquidity options for investors in general.
Furthermore, the regulator has mentioned the pipeline of other proposals being worked on to increase trust in the corporate bond market.
In its report, Sebi said that asset management companies (AMC) mutual funds were in the process of setting up the entity for recognition as LPCC (limited purpose Clearing Corporation) to clean and complete repo transactions in company debt securities.
The regulator has issued a framework for LPCC which includes the contribution of Rs 150 Crore to the capital shares of LPCC proposed by AMC.
“It is expected that the entity formed by AMC for cleaning the repo will immediately function,” said Sebi.
With the intention of developing further and deepening the corporate bond market, SEBI plans to change the existing rules related to the issue and list of debt lists by eliminating excessive provisions, loosening the debt effect edition process and increase the provisions of protection and transparency.
This regulator also wants to increase the requirements of a sustainable list for registered debt entities so that it can increase the granularity of disclosures related to finance, material events including credit events, disclosure related to corporate governance including related party transactions.