PMS to undertake 10% transactions in corp bonds via RFQ platform: Sebi

To enhance transparency in debt investments by Portfolio Management Services in corporate bonds, Sebi on Thursday said PMS will have to undertake at least 10 per cent of their transactions through the request for quote platform.

The new framework, which will come into force with effect from April 1, 2022, will also boost liquidity on the exchange platform, the Securities and Exchange Board of India (Sebi) said in a circular.

"On a monthly basis, PMS shall undertake at least 10 per cent of their total secondary market trades by value in corporate bonds (CBs) in that month by placing/seeking quotes through one-to-one (OTO) or one-to-many (OTM) mode on the Request for Quote platform of stock exchanges (RFQ)," Sebi said.

To ensure compliance with the requirement, PMS will have to consider the trades executed by value through OTO or OTM mode of RFQ for the total secondary market trades in corporate bonds, during the current month and immediate preceding two months on a rolling basis.

All transactions in corporate bonds wherein PMS is on both sides of the trade shall be executed through RFQ in OTO mode.

However, any transaction entered by PMS in corporate bonds in OTM mode, which gets executed with another PMS, will be counted in OTM mode.

PMS is permitted to accept the contract note from the stockbrokers for transactions carried out in OTO and OTM modes of RFQ.

Accordingly, from April 2022, PMS will have to ensure that at least 10 per cent (by value) of their secondary market trades in CBs in the current month and immediate preceding two months -- February 2022, March 2022 and April 2022 -- are executed by placing or seeking quotes through OTO or OTM mode of RFQ.

Further, for May 2022, the secondary market trades executed in corporate bonds in March 2022, April 2022 and May 2022 will be considered for calculation.