SEBI Allows Stockbrokers To Place Bids on RFQ Platform
Moneylife Digital Team 20 October 2022
Market regulator Securities and Exchange Board of India (SEBI) has allowed stockbrokers registered under the debt segment of the stock exchanges to place or seek bids on the request for quote (RFQ) platform on behalf of its clients. This will be in addition to the existing option of placing bids in a proprietary capacity. The new norm will come into effect from 1 January 2023 and is expected to enhance public participation and the deepening of the secondary market in corporate bonds.
SEBI says it has been receiving representations from market participants to permit stock brokers to place bids on behalf of their clients to facilitate broader market participation in the corporate bond market. "Hence, it has been decided to allow stock brokers to place bids on the RFQ platform."
RFQ is an electronic platform that enables multilateral negotiations to take place on a centralised online trading platform with straight-through processing of clearing and settlement to complete trades. 
In February 2020, following SEBI approvals, National Stock Exchange (NSE) and BSE launched RFQ platforms to extend their existing trade execution and settlement platforms to bring transparency in over-the-counter deals in corporate bonds, which were negotiated bilaterally. 
The platform provides participants with a range of options to seek a quote and to respond to a quote, while keeping an audit trail of all interactions, i.e., quoted yield, mutually agreed price, and deal terms. The quotes are bilaterally negotiated between the counterparties. 
At present, the RFQ platform runs as a 'participant-based' model wherein all regulated entities, listed corporate bodies, institutional investors and all India financial institutions are eligible to register, access and transact.
To enhance liquidity on the RFQ platforms of the stock exchanges, SEBI has mandated registered mutual funds and portfolio management services, to undertake a specified percentage of their total secondary market trades in corporate bonds through RFQ platform of stock exchanges. 
Insurance Regulatory and Development Authority of India (IRDAI) has also prescribed similar stipulations for insurers. Since its introduction, the percentage of RFQ trades to total trades in the bond market has been growing and presently stands around 30%.
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