SEBI directs Portfolio Management Services to undertake 10% of total transactions in corporate bonds

Circular No. SEBI/HO/IMD/IMD-I/DOF1/P/CIR/2021/678, Dated, 9-12-2021

In order to enhance transparency about debt investments by Portfolio Management Services (PMS) in Corporate Bonds (CBs) and to increase liquidity on the exchange platform, SEBI has decided that, on monthly basis, PMS shall undertake at least 10% of their total secondary market trades by value in CBs in that month by placing quotes through one-to-one (OTO) or one-to-many (OTM) mode on Request for Quote platform of stock exchanges (RFQ). 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 immediately preceding two months on a rolling basis., said SEBI.

SEBI further clarified that all transactions in corporate bonds wherein PMS is on both sides of the trade shall be executed through RFQ in OTO mode. Though, any transaction entered by PMS in corporate bonds in OTM mode, which gets executed with another PMS, will be counted in OTM mode. The new framework will come into force w.e.f 01-04-2022.

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