SEBI asks FPIs to trade 10% of corporate bonds via RFQ

SEBI asks FPIs to trade 10% of corporate bonds via RFQ

Subject: Economy

Section: Capital market

Context: SEBI mandates foreign portfolio investors (FPIs) to place at least 10% of their trades in corporate bonds through the Request For Quote (RFQ) platform of stock exchanges.

Key Points:

• The move is aimed at increasing the liquidity on the RFQ platform and enhancing the transparency and disclosures pertaining to investments in corporate bonds, which in turn will encourage investment by FPIs in the corporate bond segment.
• What is the RFQ platform?
  • RFQ, which was launched on BSE and NSE in February 2020, is an electronic platform that enables multi-lateral negotiations to take place on a centralised online trading platform with straight-through processing of clearing and settlement to complete the trade. A wide variety of debt securities are available for trading on the RFQ platform.
• While the overall corporate bond investment by FPIs is low, the percentage of such trades carried out on the RFQ platform is even lower.
• Now FPIs will have to undertake at least 10 percent of their total secondary market trades in corporate bonds by value by placing/seeking quotes on the RFQ platform of stock exchanges.
• The move is aimed at increasing the liquidity on the RFQ platform of stock exchanges and to enhance the transparency and disclosure pertaining to trading in the secondary market in corporate bonds.
• SEBI said that it already provided a similar mandate for other intermediaries such as alternative investment funds (AIFs), portfolio management services (PMS) and stock brokers.