Fin Tech to set up corp bond bourse

Financial Technologies, which recently got the government approval to set up an energy exchange, is now planning an exchange for illiquid corporate bonds.

The company, which is also the promoter of commodities derivatives exchange MCX, has submitted the proposal to the Securities and Exchange Board of India, market sources said.

The move is a part of Financial Technologies strategy to take advantage of opportunities in the business of running exchanges. The company also has plans to start an exchange for trading in shares of small and medium enterprises.

The company, which also holds 49 per cent stake in the Dubai Gold and Commodities Exchange, recently received the go-ahead from the Central

Electricity Regulatory Commission to set up Indian Energy Exchange. The proposal submitted by Financial Technologies envisages a demutualised exchange, wherein strategic and financial investors would hold equity stakes. An official spokesperson of Financial Technologies declined to comment.

According to the Securities and Exchange Board of India (Sebi) data, trading in corporate bonds, including over the counter trades and trading through exchanges, stood at Rs 53,664.26 crore between January and August.

In this month (till September 20), the trading stood at Rs 532.66 crore. Market sources said in the absence of primary market reforms, actual trading in bonds would not take place and even a separate corporate bond exchange is set up, it would only diversify the present trading.

However, others said volumes were growing up and trading in the bond market had already picked up, even in the primary market, through private placements, which is a healthy situation.

As per the current guidelines for private placement, a corporate will have to go in for a public issue, if there are more than 49 investors in an issue, which is both costly and time consuming.

The report of high level committee on corporate bonds and securitisation under R H Patil, the former chief of NSE, appointed in 2005, had noted: "The primary corporate debt market did not develop efficiently and remained purely an institutional market. The secondary markets have remained highly illiquid with only a limited number of banks/institutions participating in the same. Good credit-rated corporates have not shown any keenness to tap the public issue market as the regulatory requirements including quality and the type of disclosures are more rigorous in the case of public issues."

To revive the corporate bonds market, the Sebi had already put forth several measures to the government and the RBI such as changes in the Companies Act, removal of tax deduction at source, uniform stamp duty structure and making corporate bonds eligible for repos.