The Securities and Exchange Board of India (SEBI) on November 14 came out with a detailed regulatory framework for Online Bond Platform Providers (OBPPs) that are selling listed debt securities.
Key features of OBPP framework
- 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 exchange.
- An entity acting as an OBPP prior to the new rules coming into force, cannot offer products or services on its platform except listed debt securities and debt securities proposed to be listed through a public offering.
- 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.
- In its application, the entity will 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.
- The entity would have to ensure compliance with the minimum disclosure requirements. It would also have to disclose on its platform all instances of conflict of interest, if any, arising from its transactions or dealings with related parties.
- The entity needs to have a comprehensive risk management framework covering all aspects of its operations and would have to ensure that prudently.
- The OBPP concerned would be required to have appropriate safeguards to deal with exigencies like suspension of trading in debt securities, cancellation of orders by the investors and sellers, and malfunctions in the use of its systems by investors and sellers.
- The OBPP would have to keep the stock exchanges informed of events resulting in disruption of activities or market abuse without undue delay.
Why framework?
- 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 Online Bond Platforms (OBPs), measures for mitigation of payment.
- During the past few years, there has been an increase in the number of OBPPs offering debt securities to non-institutional investors. Most of them are fintech companies or are backed by stock broker.
