Sebi mulls online bonds trade

The Securities and Exchange Board of India (Sebi) proposes to start online trading in the corporate bonds market.

In a bid to develop the corporate bonds market, the market regulator is in talks with private vendors who provide screen-based trading services.

Sebi is finalising the modalities before the companies can start trading online. However, these vendors could only act as trade facilitators and not use the platform for proprietary trading (trading or issuing on one's own behalf), sources clarified.

At present, the proposal is with Sebi's primary market advisory committee. The sources close to the development said the online platform could later be extended to the primary issue of equity shares.

The sources further clarified that the online platform would be a privately managed set-up between the company and online vendors and that the Sebi would only be the monitoring authority with no role to play in the process.

The market regulator also proposes to extend the fast-track approval process for follow-on equity issues to corporate bond issues as well.

As in the case of follow-on and rights issues of companies, bond issues could get fast-track approvals, if the company has issued its bonds earlier and necessary details are submitted to the regulator.

Sebi is already working on an abridged form of a prospectus for the issuance of bonds, which would cut down cost and time. The market regulator has already laid down certain criteria for the fast-track issuance of securities.

According to the criteria, the issuing company should be listed either with NSE or BSE for at least three years and should have an average free-float market capitalisation of at least Rs 10,000 crore during the last one year.

Besides, shares traded on stock exchanges should constitute at least 2 per cent of the total listed shares during the previous one year.

While there should not be any prosecution or a show-cause notice pending against such companies, it is also to be seen that the impact of the auditor's qualification on the audited accounts should not exceed 5 per cent of the net profit or loss after tax.