Sebi proposes regulations for online bond platforms

The Securities and Exchange Board of India(Sebi) has proposed to bring online bond platforms that are selling listed debt securities under its regulatory framework.

At present, debt securities can be issued either through a public issuance or on private placement basis. A public issue of debt securities is made through the online system of the stock exchange and depositories.

For privately placed debt securities, it is mandatory to be made through Electronic Book Provider (EBP) platform, for issuers who are in existence for three years and more and where the issue size is of ₹100 crore or more.

Sebi said data showed that a substantial number of issuances of debt securities is through private placement mode.

While non-QIB (qualified institutional buyers) investors authorised by the issuer are eligible for bidding on the EBP platform, there is no participation from non-institutional investors as hardly any market participant other than QIBs invests through the EBP platforms.

“This perhaps explains why a number of online bond platforms have mushroomed over the past two to three years, which sell debt securities to investors, particularly non- institutional investors. Some of these platforms seemingly operate in a manner similar to organized avenues for trading a’la market infrastructure institutions, especially stock exchanges, bringing together buyers and sellers for executing trades in debt securities,” Sebi said in a discussion paper on Thursday.

“While these bond platforms do tap a group of investors, particularly non-institutional investors to invest in bonds, they do not come under any regulatory purview i.e. the platform providers are not registered with any regulator. This has given rise to a need to guide and regulate these platforms in order to bring about, inter-alia, regulatory oversight, common standard practices, investor redress mechanism,” the regulator said.

In India, most of such bond platforms are fintech companies or are backed by brokers.

These companies are GoldenPi, BondsIndia, Harmoney, Altifi, Wintwealth,Bondskart, Indianonds among others.

The majority of the investors registered on these platforms are non-institutional investors. Sebi said data showed that there has been a significant increase in the number of users registered on the bond platforms besides a noticeable increase in the volume of trades undertaken on the bond platform as well as in the number of users who have transacted on the bond platform.

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