Special Correspondent

MUMBAI: The Securities and Exchange Board of India (SEBI) on Friday issued a circular allowing the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) to set up trading platforms for corporate bonds with effect from July 1.

Minimum lot Rs. 1 lakh

The minimum trading value for corporate bonds for all entities has been reduced to Rs. 1 lakh from the existing Rs. 10 lakh.

The stock exchanges may also have a limited segment for transactions in smaller market lots. The actual or actual day count convention applicable for government securities would be mandatory for all new bond issues.

This is part of the process of implementing the Union Budget proposals for developing an exchange traded market for corporate bonds, SEBI said. It would enable efficient price discovery and reliable clearing and settlement in a gradual manner, SEBI stated.

Order-driven market

To begin with, the trade matching platform would be an order-driven one with essential features of an over-the-counter (OTC) market. According to the regulator, BSE and NSE would make use of their existing infrastructure, with necessary modifications, to set up the trading platform. The trade matching platform would be available to members of the respective stock exchanges.

With the introduction of the trading platform, orders executed through trading platforms of either BSE or NSE may not be reported again on the reporting platforms.

At the option of the participants, they may also continue to trade over-the-counter, but would continue to be reported on the reporting platforms.

In the initial phase, the trades would be settled bilaterally between trading parties.