SEBI takes Steps to Boost Liquidity on RFQ Platform for Corporate Bond Trading by Stock Brokers

The Securities and Exchange Board of India (SEBI) has announced measures to enhance liquidity and promote transparency in the trading of corporate bonds on the Request for Quote (RFQ) platform of stock exchanges. These steps aim to facilitate secondary market transactions in corporate bonds and improve price discovery.

SEBI has introduced certain stipulations for transactions on the RFQ platform, specifically targeting Mutual Funds, Portfolio Management Services, and Alternate Investment Funds. Additionally, SEBI has decided to increase liquidity on the RFQ platform for trading in Corporate Bonds (CBs) by Stock Brokers (SBs).

Starting from July 1, 2023, SBs will be required to undertake a minimum of 10% of their total secondary market trades in CBs by value for that month using the one-to-one (OTO) or one-to-many (OTM) mode on the RFQ platform. Furthermore, from April 1, 2024, SBs must undertake at least 25% of their total secondary market trades in CBs by value for that month using the same modes.

To assess compliance, SEBI will consider trades executed via OTO or OTM mode on the RFQ platform in relation to the total secondary market trades in CBs during the current month and the immediate preceding two months on a rolling basis. Only trades conducted in proprietary capacity will be taken into account for these calculations.

SEBI has also encouraged SBs to place bids on the RFQ platform through the OTM mode, as this will contribute to achieving better price discovery.