Sebi takes steps to boost liquidity in RFQ platform

This was in addition to the existing option of placing bids in a proprietary capacity.Quotes on RFQ platforms can be placed to an identified counterparty -- one-to-one mode -- or to all the participants -- one-to-many mode.Moreover, stock brokers have been encouraged to place bids in proprietary capacity or for clients on RFQ platform through OTM mode, as the same would contribute towards achieving better price discovery.

Capital markets regulator Sebi on Friday came out with guidelines for transactions in corporate bonds through the Request for Quote (RFQ) platform by stock brokers in order to increase liquidity on the platform.

For all the trades in proprietary capacity, stock brokers will have to undertake at least 10 percent of their total secondary market trades by value in corporate bonds in that month by placing quotes through one-to-one or one-to-many mode on the RFQ platform of stock exchanges from July 1, and further, the percentage will increase to 25 percent from April next year, Sebi said in a circular.

Stock brokers will have to consider the trades executed by value through one-to-one (OTO) or one-to-many (OTM) mode of RFQ with respect to the total secondary market trades in corporate bonds, during the current month and immediately preceding two months on a rolling basis.

Further, only trades pertaining to the proprietary capacity of stock brokers will be considered for the purpose of such calculations.

The RFQ or Request for Quote platform is a system or interface for inviting and/or giving quotes on an electronic platform. The platform was introduced as a 'participant-based' model, wherein all regulated entities, listed corporate bodies, institutional investors, and all Indian financial institutions were eligible to register, access, and transact.

In October 2022, Sebi allowed stock brokers to place bids on the RFQ platform on behalf of their clients to facilitate wider participation in the corporate bond market. This was in addition to the existing option of placing bids in a proprietary capacity.

Quotes on RFQ platforms can be placed to an identified counterparty -- one-to-one' mode -- or to all the participants -- one-to-many' mode.

Moreover, stock brokers have been encouraged to place bids in a proprietary capacity or for clients on the RFQ platform through OTM mode, as the same would contribute towards achieving better price discovery.

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