Sebi moots reforms to deepen bond market

New Delhi: Sebi chief Ajay Tyagi on Thursday said several reforms are in the pipeline to deepen the bond market, including creating a set of market makers and setting up a backstop facility to purchase investment grade debt securities in stressed as well as normal times.

Market makers are entities that quote both a buy and a sell price for corporate bonds in order to create liquidity in the secondary market for such bonds. The other major reform in the pipeline is setting up of a Limited Purpose Clearing Corporation for repo in corporate bonds, Tyagi said at an event organised by industry body CII.

As per trends in the corporate bond market, around 97-98 per cent of the corporate bonds are issued through the private placement route and around 90 per cent of the issuances are of AA and above ratings. Trading in the secondary market lacks depth and is largely dominated by mutual funds. "We need more public issuances; issuances of relatively lower rated bonds; and increased depth in the secondary market with many more players," Sebi chief said.

The Securities and Exchange Board of India (Sebi) has taken certain initiatives and some more are in the pipeline. The measures taken by the regulator include limiting the number of ISINs (International Securities Identification Numbers) in a year, mandating certain minimum borrowing through bonds for large borrowers and introducing RFQ (Request for Quote) platform to improve pre and post-trade transparency.

"Reforms in the pipeline include setting up of a Limited Purpose Clearing Corporation for repo in corporate bonds, creating a backstop facility to purchase investment grade debt securities in stressed and normal times, and enabling a set of intermediaries acting as market makers in the bond market," Tyagi said.