To curb the menace of the online bond platforms, capital market regulator SEBI has said only listed bonds or proposed to be listed debt securities can be sold to retail investors, reported Business Line.
India has a bond market worth trillions of rupees but it does not attract traders like equities.
Instead, a number of websites, under the garb of fintech companies, backed by large stock brokers, have started selling bonds on their platforms to retail investors without any regulatory oversight. SEBI has, therefore, specified norms to bring them under its purview.
SEBI has said that Online Bond Platform Providers (OBPPs) would be companies incorporated in India and they should register themselves as stock brokers in the debt segment of the stock exchanges, effective immediately. The move is likely to rev-up bond volumes on the BSE and NSE.
“With the bond market offering tremendous scope for development, particularly in the non-institutional space, there is a need to place checks and balances in the form of transparency in operations and disclosures to the investors dealing with such OBPs, measures for mitigation of payment. While OBPs provide an avenue for investors, particularly non-institutional investors to access the bond market, their operations were outside regulatory purview,” Sebi said.
Earlier, SEBI had also put out a detailed platform for entities operating or desirous of operating as OBPPs.
After obtaining registration as a stock broker in the debt segment of a stock exchange, an entity would have to apply to the bourse to act as an OBPP.
The entity will also have to ensure that roles and obligations, technology, operating framework -- access and participation, Know Your Client (KYC) for on-boarding investors and sellers and risk profiling of investors -- are complied with.