SEBI Proposes Measures to Boost Liquidity in Corporate Bond Market

SEBI Report; dated: 19.05.2023

SEBI has released a consultation paper to enable direct participation by clients/participants in the Limited Purpose Clearing Corporation (LPCC) – tri-party repo segment for corporate bonds. This move aims to facilitate easier participation by market participants, ensuring greater volumes in the corporate bond market. This, in turn, serves to boost the liquidity in the secondary market for corporate bonds.

The proposal will facilitate direct participation in repo transactions in corporate bonds by entities that are unable to obtain direct membership of the stock exchange, clearing corporations such as NBFCs, insurance companies, mutual funds etc.

Further, in order to strengthen the risk management system of the LPCC to meet the contingencies arising on account of possible failure of the clients/ participants as well, it is essential that the contribution to the Core Settlement Guarantee Fund (SGF) can also be made by clients/ participants directly in cases where the Clearing Member is not involved in the tri-party repo transactions.

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