On June 2, 2023, the Securities and Exchange Board of India (SEBI) issued guidelines for transactions in Corporate Bonds (CBs) through the Request for Quote (RFQ) platform by stock brokers (SBs) in order to increase liquidity on the platform and to enhance the transparency and disclosure pertaining to trading in the secondary market in corporate bonds.
Key Points:
i.SEBI has asked SBs to undertake at least 10% of their total secondary market trades by value in CBs in that month by placing/seeking quotes through one-to-one (OTO) or one-to-many (OTM) mode on the RFQ platform of stock exchanges.
- The instruction would be applicable for all the trades in a proprietary capacity with effect from July 01, 2023.
ii.The value would be increased by 25% of their total secondary market trades from April 1, 2024, onwards.
Note – This circular is issued by SEBI in the exercise of powers conferred under Section 11(1) of the SEBI Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.
About Request for Quote (RFQ):
i.The RFQ is a trade execution platform launched in 2020 as per the guidance of SEBI, for inviting and/or giving quotes. It is a direct participation model where all participants trade in their own accounts.
ii.Under the platform all regulated entities, listed corporate bodies, institutional investors and all Indian financial institutions were eligible to register, access and transact.
iii.In October 2022, SEBI allowed SBs to place bids on the RFQ platform on behalf of their clients to facilitate wider participation in the CB market.
- This was in addition to the existing option of placing bids in a proprietary capacity. Quotes on RFQ platforms can be placed through OTO or OTM mode.
iv.In January 2023, SEBI allowed the participants to use the services of SEBI-registered brokers for participation in RFQ platform.
v.The RFQ platform also provides options for users to seek a quote and to respond to a quote.
vi.The platform uses RFQ protocol where an initiator may request other participants for a quote in corporate bonds, securitised debt instruments, municipal debt securities, Government securities, State development loans, Treasury Bills, Commercial Papers and Certificates of Deposit or any other security as specified by an exchange from time to time.
Additional info:
i.SEBI has been taking steps to increase the liquidity on RFQ platform of stock exchanges and made certain stipulations for transactions on RFQ platform by Mutual Funds , Portfolio Management Services, and Alternate Investment Funds.
ii.SEBI has directed the stock exchanges to file the compliance report from August 2023 with the Department of Debt and Hybrid Securities (DDHS), SEBI.
Recent Related News:
The Securities and Exchange Board of India (SEBI) has mandated alternative investment funds (AIFs) to provide investors with the option of a “direct plan” and introduced a trail model for distribution commission.
About Securities and Exchange Board of India ( SEBI):
Chairperson -Madhabi Puri Buch
Headquarters – Mumbai, Maharashtra
Establishment – 12 April 1992
