Sebi sets new norms for corporate bonds

The Securities and Exchange Board of India (Sebi) said today that clearing and settlement of trades in corporate bonds should be done through clearing corporations from December 1, 2009. This will be either through the National Securities Clearing Corporation (NSCCL) or the Indian Clearing Corporation (ICCL).

So far, the National Stock Exchange (NSE), Bombay Stock Exchange (BSE) and the Fixed Income Money Market and Derivatives Association of India (FIMMDA) were authorised to set up and maintain reporting platforms to capture information related to trading in corporate bonds.

In a note, the market regulator said today: “All trades in corporate bonds between specified entities ... shall necessarily be cleared and settled through the NSCCL or the ICCL.”

The new provisions will be applicable to all corporate bonds traded over the counter (OTC) or on the debt segment of stock exchanges.

However, they will not be applicable to trades in corporate bonds on the capital market segment/equity segment of the stock exchanges and are required to be settled through clearing corporations or clearing houses of stock exchanges.

Further, Sebi has directed NSE and BSE to make amendments to the listing agreement, bye-laws, rules and regulations for the implementation of the new norms.

Meanwhile, the Reserve Bank of India (RBI) has allowed both the clearing houses NSCCL and the ICCL to open transitory pooling accounts with the central bank in Mumbai to facilitate settlement of OTC corporate bond transactions in Real-Time Gross Settlement system on a trade-by-trade basis.