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N.K. Kurup

Exchange to enable online order matching system

Mumbai , April 25

The Securities and Exchange Board of India will shortly come out with the modalities for setting up a unified exchange for trading in corporate bonds.

The decision follows the announcement by the Finance Minister, Mr P. Chidambaram, in the Union Budget 2006, suggesting measures for creating a `single, unified exchange traded market' for corporate bonds.

The capital market regulator is currently working on a draft report on the unified exchange and is expected to release it shortly, said a SEBI source.

The Government had set up a committee under the chairmanship of Dr.R.H.Patil to study the corporate bond market in India and suggest measurers to develop a trading system for such debt instruments.

The Committee, in its submitted in last December, recommended multiple trading platforms for corporate bonds, licensed and regulated by the SEBI. It was suggested that the existing stock exchanges could set up platforms for trading in corporate bonds

However, the Government appears to have chosen to go ahead with a unified, single market for corporate bonds.

The Government's intention now is to set up an exchange that would enable online order matching system in corporate bonds. This will help develop the primary and secondary markets for corporate debts. The operational and regulatory details of the exchange would be worked out by SEBI.

Currently, the NSE has a wholesale debt-trading segment, but it is not a fully anonymous order matching system, as in the case of equity trading.

There has been a suggestion to use the clearing and settlement facilities of the Clearing Corporation of India. This is similar to the electronic order matching trading module of the National Dealing System being followed in the case of Government securities. It was argued that this would eliminate the cost of creating new facilities, but the SEBI is believed to be not in favour of this idea.

More Stories on : Corporate Bonds | Debt Market | Regulatory Bodies & Rulings

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