Banks, Sebi talk on new bond

Nov 23, 2007
Ashish Rukhaiyar & Preeti R Iyer
MUMBAI

REPRESENTATIVES of major banks met officials of Sebi on Thursday, proposing that they be allowed to become direct members of bond market clearing house. The proposal, if approved, will expedite the settlement process in the corporate debt market. But it has to be approved by both Sebi and RBI. According to sources, the meeting was also attended by exchange officials and some top debt market brokers.

Currently, all the deals in the corporate debt market are ‘over the counter’ where transactions take place directly between two players, through the telephonic mode. An entity intending to sell bonds has to place a request on the NSE platform and the deal is completed only when the buyer accepts it though the same platform.

Due to this lag, deals in the corporate debt market are not real time in nature. However, the other issue in the system is that of duplication of deals reported across the three platforms — one each by NSE, BSE and FIMMDA.

The volumes are very thin as processes are not streamlined, said a bond house dealer. On a different note, repo trading is also believed to have been discussed. Market players feel repo trading must be allowed for volumes in debt segment to pick up.

Sources feel proposals will take time for implementation; there needs to be clarity on issues like permission for trading junk bonds on these platforms, or restricting it to triple A rated bonds.