Sebi to permit FPIs for trading directly in corporate bonds without a broker

Market watchdog Securities and Exchange Board of India (Sebi) today relaxed norms for foreign portfolio invetsors (FPIs) in corporate bond market. 

Amending the norms Sebi said,"Category I and Category II FPIs will have an option to directly access corporate bond market without brokers as has been allowed to domestic insitution such as banks, insurance, companies pensions fund etc."

Under the roof of Category - I FPIs are, soevereign wealth funds and central banks, while  Category - II FPIs includes mutual funds and banks. 

Earleir the Sebi (FPIs) regulations, 2014 on January 07, 2014, notified that, the transaction of business in securities by a foreign portfolio investors shall be auhtorized only through stock brokers registered by the board. 

Further, these stock brokers were required to be a qualified member of Recognized Stock Exchange in accordance with rule 8 of the securities contracts (regulations) rules, 1957, it said in a release.

Now with the new amendment in picture, the access to over-the-counter (OTC), request for quote (RFQ), electronic book provider (EBP) platforms of RSE will be provided to FPIs only for propreitary trading. 

In this regards, Sebi will take the proposal towards the Government of India to permit FPIs to become a member of RSE for the limited purpose of proprietary trading. 

This move comes in line with the Reserve banks of India's aim in deepening the corporate bond markets. 

On August 26, for strengthening corporate bond market, the apex bank announced measures such as to permit brokers in corporate bond repos (or repurchases), allow foreign investors to directly trade in corporate bonds and especially to allow corporate bonds as collateral at its liquidity adjustment facility (LAF) operations.