Reetu | Jan 16, 2023 |
SEBI permits Stock Exchanges to launch futures contracts on Corporate Bond Indices
The Securities and Exchange Board of India (SEBI) has released a Circular few days ago and approved the Stock Exchanges to launch futures contracts on Corporate Bond Indices in order to to protect the interests of investors in securities and to promote the development of and to regulate the securities market.
The Circular Stated, “In order to enhance liquidity in the bond market and also to provide opportunity to the investors to hedge their positions, SEBI had constituted a working group of representatives of NSE, BSE and MSEI to make recommendations on the matter of ‘Derivatives on Bond Indices.’”
Based on the working group’s submissions and the recommendations of SEBI’s Secondary Market Advisory Committee, it has been decided to allow Stock Exchanges to introduce derivative contracts on indices of corporate debt securities rated AA+ and above. To begin, future contracts on corporate bond indices may be launched by stock exchanges.
The details regarding index composition, contract specifications, position limits, risk management framework, etc. for introduction of future contracts on corporate bond indices are given in Circular.
Stock exchanges interested in introducing such contracts must submit a detailed proposal to SEBI for approval, including information about the underlying corporate bond index, index methodology, contract specifications, applicable trading, clearing & settlement mechanism, risk management framework, safeguards to ensure market integrity, investor protection, surveillance systems, and so on.
For implementation of the above, Stock Exchanges and Clearing Corporations are advised to:
1. take necessary steps and put in place necessary systems.
2. make necessary amendments to the relevant bye-laws, rules and regulations.
3. bring the provisions of this circular to the notice of their members and also to disseminate the same on their websites.
This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
For Official Circular Download PDF Given Below:
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