On 19-10-2022, the Securities and Exchange Board of India (‘SEBI’) has issued a circular on Request for Quote (‘RFQ’) platform for trade execution and settlement of trades in listed Non-convertible Securities, Securitized Debt Instruments, Municipal Debt Securities and Commercial Paper to bring in transparency in “Over the Counter” deals which are negotiated bilaterally and to facilitate wider market participation in the corporate bond market. The provisions of this circular will come into effect from 1-01-2023.
Key Points:
-
Earlier, stockbrokers were only allowed to place bids in a proprietary capacity. Now, SEBI has allowed such stockbrokers to place bids on this platform on behalf of clients also.
-
RFQ is an electronic platform to enable sophisticated, multi-lateral negotiations to take place on a centralized online trading platform with straight-through-processing of clearing and settlement to complete a trade.
-
Basic features of RFQ platform:
-
System for inviting/ giving quotes electronically.
-
Participant may request other participants for a quote of eligible security.
-
The quote can be placed to an identified counterparty through:
i) One To One (‘OTO’) mode
ii) One To Many (‘OTM’) mode
-
An audit trail of all interactions, I.e., quoted yield, mutually agreed price, deal terms etc., are maintained.
-
Negotiation is bilateral in nature.
-
Securities eligible:
i) Non-convertible securities
ii) Securitized Debt Instruments
iii) Municipal Debt Securities
iv) Commercial Paper
v) Certificate of Deposit
vi) Government Securities
vii) State development Loans
viii) Treasury Bills
-
*Kriti Kumar, Editorial Assistant has reported this brief.