Sebi mandates MFs to use RFQ platform for 10% of secondary transactions1 min read . Updated: 22 Jul 2020, 09:41 PM IST
- This is aimed at boosting the liquidity on the exchanges for secondary market bond transactions
- The regulator also mandated mutual funds to disclose their portfolio every 15 days
Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday said mutual funds will undertake at least 10% of their secondary markets trade in corporate bonds through the Request for Quote (RFQ) platform of stock exchanges from October 1.
This is aimed at boosting the liquidity on the exchanges for secondary market bond transactions. The regulator also mandated mutual funds to disclose their portfolio every 15 days. Currently, as per norms funds disclose month end portfolios only few funds give out half monthly portfolios.
The secondary trades will not include inter-scheme transfers.
The markets regulator said the move will enhance the transparency and disclosure pertaining to debt schemes and investments by mutual funds in corporate bonds and commercial papers. This is based on recommendations of Mutual Fund Advisory Committee (MFAC).
At the capital markets summit organised by an industry body on Wednesday Ajay Tyagi, chairman, Sebi said that this move will also improve price discovery in bond market.
"Trading in corporate bonds is largely OTC (over the counter), which is then reported to the exchanges. To replicate this OTC nature but with better price discovery and transparency through electronic mode, Sebi has recently introduced RFQ platforms. We have decided to mandate Mutual Funds to use this platform in a phased manner. Use of this platform by other institutional investors as well will result in better transparency and price discovery in the bond market," said Tyagi.
According to Tyagi the mutual funds were the worst hit in the recent liquidity issues brought about by covid-19.
Sebi in the circular on Wednesday also said all transactions in corporate bonds and commercial papers wherein mutual fund is on both sides of the trade will be executed through RFQ platform of stock exchanges in one-to-one mode, and any transaction entered by mutual fund in corporate bonds in one-to -many mode and gets executed with another mutual fund shall also be counted for the 10% requirement.