India’s capital markets regulator is proposing to form a consortium of market makers to further consolidate and strengthen the country’s corporate bond market.
These entities will help bring liquidity to the secondary market for corporate bonds, where trading is limited to a small number of high-grade notes or trades by financial institutions, banks and mutual funds, the Securities and Exchange Board of India said in an advisory. said in. Paper Tuesday.
The role of market makers in the corporate bond market will be similar to that of the primary dealers in the sovereign bond market of India. They will provide both buy and sell quotes in the market, help absorb temporary supply and demand mismatches as well as reduce the impact of shocks on market volatility.
“This move by the regulator will increase investor participation in the corporate bond market as these market makers will provide two-way quotes, allowing buyers to enter and exit easily, thereby reducing the existing liquidity in the secondary market,” the management said. Director Ajay Mangaluniya said. Director and Head of Institutional Fixed Income at JM Financial Ltd. “It will also cut funding costs for companies because the higher the number of buyers, the better the price discovery.”
Indian authorities have long tried to expand the country’s corporate bond market to better distribute credit risks and reduce companies’ reliance on bank loans. A lack of liquidity in the secondary market forced Franklin Templeton to wind up some of its Indian debt funds last year because of the high exposure to lower-rated bonds, highlighting the need for reforms in the country’s corporate bond market.
The regulator has sought comments from market participants and stakeholders on the proposed introduction of market makers by December 16.
This story has been published without modification in text from a wire agency feed.
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