India's largest bourse, National Stock Exchange (NSE), is all set to launch a dedicated trading platform for debts this April (2013) month with capital market regulator SEBI giving the green signal last week.
The NSE exchange is in the midst of a membership drive to sign up entities for the new debt market segment and is expected to hold mock trading sessions from next week.
NSE will be the first exchange to offer a separate trading platform for debts. Other stock exchanges such as BSE & MCX - SX are awaiting SEBIs clearance to launch debt trading.
According to regulations, banks, insurance companies, pension funds, provident funds & retail investors can trade in corporate bonds & government securities.
Now, other than tax-free bonds, most debt papers are traded over the counter in negotiated deals before the transactions are reported to the debt segment of the exchanges. But, once banks and financial institutions put bid-offer quotes on trading screen, the wholesale debt market will have greater transparency.
Indian exchanges are proposing to launch anonymous order matching and negotiated dealing system for wholesale market participants & this is proposed to be similar to the trading and settlement systems for equity markets.
This would increase participation in the domestic corporate bond markets. However, it is a deviation from how corporate bonds are traded in the global markets globally, corporate bonds are not traded on exchanges. But on brokerdealer or inter dealer - broker platforms and on OTC (Over the counter) broker markets, with a common clearing platform such as Euroclear or / Clearstream.
This allows trades on open platforms with larger participation, said Mr. Ashish Ghiya, MD, Derivium Capital.
A separate membership, dedicated to the proposed segment, will be issued to banks and insurance companies, which are currently restricted from being stock exchange members.
Mutual funds could also expect to participate in this segment once SEBI gives the clearance. India has a long way to go in developing its debt market.
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