Sebi asks MFs to use RFQ platform for at least 25% of secondary market transactions


The Securities and Exchange Board of India (Sebi) said on Wednesday that starting in December, mutual funds must undertake a minimum of 25% of their secondary market transactions by value in corporate bonds on the platform. stock exchange quote request form (RFQ).

The previous requirement, which came into effect from October 2020, was 10% of total secondary market transactions by value in corporate bonds.

In addition, mutual funds must now conduct a minimum of 10% of their total secondary market transactions in commercial paper value through RFQ platforms.

This was done to further increase liquidity on the exchange platforms as well as to improve transparency and disclosure regarding debt plans and mutual fund investments in corporate bonds or commercial papers. This is based on the recommendations of the Mutual Fund Advisory Committee (CCFM).

In accordance with the market regulator, the percentages will be taken into account on the average of secondary transactions in value during the previous three months on a sliding basis.

For example, for December 2021, UCIs must carry out 25% (in value) of their average transactions on the secondary market (excluding inter-agency transfer transactions) carried out during the three immediate preceding months, i.e. July, August and September, for corporate bonds investing or looking for quotes via the RFQ stock exchange platform.

Meanwhile, mutual funds have been allowed to accept brokers’ contract note for trades done in the One to One (OTO) and One to Many (OTM) modes of the RFQ platform.

Ajay Tyagi, chairman of Sebi, said last year that mutual funds were the most affected by the liquidity problems caused by the covid-19 pandemic.

He added that the use of this RFQ platform by mutual funds as well as institutional investors will result in better transparency and price discovery in the bond market.

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