Sebi Introduces Liquidity Window Facility For Debt Securities
Investors will be allowed to purchase put options from issuers, allowing them to sell their debt instruments back to the issuer before they mature
The Securities Exchange Board of India (Sebi) proposed utilising stock market mechanisms to create a new liquidity window for investors, particularly for retail debt securities.
The market regulator stated in its draft circular on Friday that the new liquidity window facility aims to address difficulties by offering issuers a put option on debt instruments through a regulated mechanism at pre-specified dates or intervals. The purpose of this plan is to expand the corporate bond market in India.
Investors will be allowed to purchase put options from issuers, allowing them to sell their debt instruments back to the issuer before they mature. It can only be granted for future debt securities issuances that are planned to be listed and that go through the public issue procedure or private placement.
“An entity issuing debt securities, which are proposed to be listed, may at its option/ discretion provide the liquidity window facility for the debt securities, on an international securities identification number basis, at the time of issuance of such debt securities and make such liquidity window facility available to the eligible investors in such debt securities,” Sebi said in the circular.
The board or a designated committee would supervise the process for entities that are solely listed for debt.
According to Sebi, issuers are required to ascertain the eligibility of investors who are able to utilise the facility. This facility may be limited to retail investors or open to all investors who own the securities in demat form.
Additionally, the market regulator suggested that the debt securities' final issuance size should not go below 10 per cent or 15 per cent. Issuers may also establish sub-limits for every liquidity window period, with excess demand to be accommodated proportionately.
Sebi stated that the liquidity window will be kept open for three working days on a monthly or quarterly basis at the discretion of the issuer to guarantee that investors are informed.
Furthermore, stock exchange, depository, and debenture trustee websites must provide public access to information regarding the liquidity window's availability and usage.
