Corporate bonds

Sebi: Sebi mulls over market-making mechanism for corporate bonds

Mumbai: Sebi has proposed to introduce market makers in the corporate bond market.

Market makers provide continuous two-way markets for buyers and sellers. The vast majority of bonds in global markets, including India, are traded over-the-counter (OTC) rather than on exchanges.

Sebi proposed that stockbrokers and investment bankers could double as market makers for the corporate bond market.

To ensure capital adequacy, stock brokerage firms and merchant banks, who wish to be market makers, must have an additional net worth of Rs 10 crore beyond the requirements of their respective Sebi regulations .

“Market-making is an important cog that will not only improve liquidity, but also provide a boost to facilitate the efficiency and functioning of the market,” Sebi said in a working paper Tuesday seeking public comment. here on December 16.

An issuer should provide market making of at least 25% of the amount to be raised.

The framework would be made applicable to every listed issuer that has listed its non-convertible debt securities and whose outstanding value is Rs 500 crore and above, as of the last date of the previous financial year.

The proposed framework would be applicable to all potential issuances, regardless of the assigned rating, Sebi said.