Sebi readying ground for trading new type of bonds
Sebi readying ground for trading new type of bonds
Capital market regulator Securities and Exchange Board of India (Sebi) is preparing ground work to launch trading in least four new categories of bonds.
These new products include municipal bonds, Sukuk bonds, covered bonds and bonds issued by co-operative societies.
According to sources, the regulator is currently in the process of studying the framework for these bonds in the contemporary foreign markets and is examining the structure to be implemented in the domestic market.
Sebi has started consultation with various stakeholders and is aiming to launch trading in these bonds in the current financial year.
For the first time, the regulator has tasted some success in debt-based exchange traded instruments.
Earlier this year, the market watchdog had re-introduced trading in interest rate futures (IRF), for the third time, with an easier framework based on market feedback. IRFs, which is derivative product with government-security as an underlying, have been clocking a weekly average turnover of around Rs 1,000 crore.
Trading on municipal bonds and Sukuk bonds is popular globally but has never been launched in India.
A few municipal corporations, in the past, have raised capital by issuing municipal bonds under the guidelines issued by the Indian government but trading hasn't been allowed in these bonds.
A municipal bond or 'muni bond' is a debt security issued by state or municipality to finance its capital expenditures such as construction of highways, bridges or schools.
In November, industry body Assocham had written to Reserve Bank of India (RBI) to allow municipal bonds to be traded.
Globally, municipal bonds are popular as they typically come with the additional advantage of an exemption from state and local taxes.
Ajay Manglunia, head of fixed income at Edelweiss, said there is a huge market for municipal bonds globally as they offer higher coupon rate compared to the government securities.
Meanwhile, Sukuk bonds are Sharia-compliant debt instruments popular in the Islamic world.
Until now, the Indian regulators haven't approved these instruments as unlike traditional debt products, they do not provide fixed return. It is likely that Sebi through the Sukuk bond framework might provide the the regulatory environment to recognise products based on Islamic finance.
Meanwhile, the so-called covered bonds are mortgage securities backed by issuing authority.
Last year, the National Housing Bank had created a working group to look into the dynamics of covered bonds. The working group headed by Sebi executive director and had representatives from RBI and finance ministry has already submitted its report.
According to money market experts, covered bonds besides widening the resource base for lenders, they also induce greater discipline to the lending industry.
Bonds issued by co-operative societies although are very common in India, so far there hasn't been trading on them.
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
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Capital market regulator Securities and Exchange Board of India (Sebi) is preparing ground work to launch trading in least four new categories of bonds.
These new products include municipal bonds, Sukuk bonds, covered bonds and bonds issued by co-operative societies.
According to sources, the regulator is currently in the process of studying the framework for these bonds in the contemporary foreign markets and is examining the structure to be implemented in the domestic market.
Sebi has started consultation with various stakeholders and is aiming to launch trading in these bonds in the current financial year.
For the first time, the regulator has tasted some success in debt-based exchange traded instruments.
Earlier this year, the market watchdog had re-introduced trading in interest rate futures (IRF), for the third time, with an easier framework based on market feedback. IRFs, which is derivative product with government-security as an underlying, have been clocking a weekly average turnover of around Rs 1,000 crore.
Trading on municipal bonds and Sukuk bonds is popular globally but has never been launched in India.
A few municipal corporations, in the past, have raised capital by issuing municipal bonds under the guidelines issued by the Indian government but trading hasn't been allowed in these bonds.
A municipal bond or 'muni bond' is a debt security issued by state or municipality to finance its capital expenditures such as construction of highways, bridges or schools.
In November, industry body Assocham had written to Reserve Bank of India (RBI) to allow municipal bonds to be traded.
Globally, municipal bonds are popular as they typically come with the additional advantage of an exemption from state and local taxes.
Ajay Manglunia, head of fixed income at Edelweiss, said there is a huge market for municipal bonds globally as they offer higher coupon rate compared to the government securities.
Meanwhile, Sukuk bonds are Sharia-compliant debt instruments popular in the Islamic world.
Until now, the Indian regulators haven't approved these instruments as unlike traditional debt products, they do not provide fixed return. It is likely that Sebi through the Sukuk bond framework might provide the the regulatory environment to recognise products based on Islamic finance.
Meanwhile, the so-called covered bonds are mortgage securities backed by issuing authority.
Last year, the National Housing Bank had created a working group to look into the dynamics of covered bonds. The working group headed by Sebi executive director and had representatives from RBI and finance ministry has already submitted its report.
According to money market experts, covered bonds besides widening the resource base for lenders, they also induce greater discipline to the lending industry.
Bonds issued by co-operative societies although are very common in India, so far there hasn't been trading on them.
Business Standard
Thanking you
Regards,
Rajesh Kumar Kathpalia ¤ SMC Global
17,Netaji Subhash Marg,Daryaganj,
New Delhi-110002 Mobile No 9891645052
Email Id: rajesh.ipo@smcindiaonline.com
--
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To unsubscribe from this group and stop receiving emails from it, send an email to Productupdatesforamc+unsubscribe@googlegroups.com.
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