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Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday mentioned mutual funds will undertake not less than 10% of their secondary markets commerce in company bonds by the Request for Quote (RFQ) platform of inventory exchanges from October 1.
This is geared toward boosting the liquidity on the exchanges for secondary market bond transactions. The regulator additionally mandated mutual funds to disclose their portfolio each 15 days. Currently, as per norms funds disclose month finish portfolios solely few funds give out half month-to-month portfolios.
The secondary trades is not going to embody inter-scheme transfers.
The markets regulator mentioned the transfer will improve the transparency and disclosure pertaining to debt schemes and investments by mutual funds in company bonds and industrial papers. This is predicated on suggestions of Mutual Fund Advisory Committee (MFAC).
At the capital markets summit organised by an trade physique on Wednesday Ajay Tyagi, chairman, Sebi mentioned that this transfer may also enhance worth discovery in bond market.
“Trading in corporate bonds is largely OTC (over the counter), which is then reported to the exchanges. To replicate this OTC nature but with better price discovery and transparency through electronic mode, Sebi has recently introduced RFQ platforms. We have decided to mandate Mutual Funds to use this platform in a phased manner. Use of this platform by other institutional investors as well will result in better transparency and price discovery in the bond market,” mentioned Tyagi.
According to Tyagi the mutual funds have been the worst hit within the current liquidity points led to by covid-19.
Sebi within the round on Wednesday additionally mentioned all transactions in company bonds and industrial papers whereby mutual fund is on either side of the commerce will probably be executed by RFQ platform of inventory exchanges in one-to-one mode, and any transaction entered by mutual fund in company bonds in one-to -many mode and will get executed with one other mutual fund shall even be counted for the 10% requirement.
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