FPIs mandated to route 10% market trade in corporate bonds through RFQ

Starting from October, all foreign portfolio investors (FPIs) will be required to conduct at least 10 per cent of their total secondary market trades in corporate bonds through the request for quote (RFQ) platform, according to a circular issued by the market regulator on Monday.

The RFQ is a dedicated platform for debt securities, launched in 2020 by stock exchanges. It provides a single interface for buyers and sellers, facilitating multilateral negotiations on a centralised online trading platform.

Until now, the majority of trades in the corporate bond market have been over-the-counter (OTC), leading to a significant amount of opacity. The market regulator has already established similar thresholds for mutual funds, alternative investment funds, and other participants, encouraging the use of the RFQ platform to enhance liquidity.

In the last financial year, FPIs executed just 4.5 per cent of their total trades in corporate bonds via the RFQ platform, representing a mere 0.78 per cent of the total trades in the segment on the platform.