The liquidity window service allows investors holding listed debt securities to resell them to the issuer using a put option on specific dates, ensuring liquidity.
This facility, available from November 1, will be immensely useful to investors, especially retail investors, and can serve to enhance their investment in such debt securities, Sebi said in a circular.
The regulator noted that corporate bonds are considered illiquid because many institutional investors hold them to maturity, leading to low trading activity. To improve liquidity, especially for retail investors, Sebi introduced a framework under which issuers can offer liquidity services.
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Under this, issuers can choose whether to offer this facility for debt securities at the time of issue. Applies to new issues of debt securities, either through public offerings or private placements.
Sebi said the facility requires board approval and monitoring by the Stakeholder Relations Committee (SRC) or an equivalent board-level committee. It must be transparent, objective and non-discriminatory towards eligible investors.
The service will be available for one year after issuance, and securities under this scheme cannot be reissued, leaving such ISINs excluded from the ISIN regulatory limits. Sebi said issuers can restrict eligibility to all investors or only retail investors, provided they hold the securities in demat form.
At least 10% of the issue size must be allocated to the liquidity window, with sub-limits limiting the number of securities offered per window; If the demand exceeds the limit, acceptance will be proportionate.
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The window will remain open for three business days and may operate on a monthly or quarterly basis, with notifications sent via SMS or WhatsApp at the beginning of the year.
Investors can exercise the put option by locking securities in their demat accounts during trading hours, with the option to modify or withdraw the offers. Settlement will occur within four business days, payments will be made one day after the window closes, and issuers cannot offer more than 100 basis points of discount on valuation plus accrued interest.
Issuers are required to manage acquired securities within 45 days, either by selling them on exchanges or extinguishing them, and any sale will reset usage limits for future windows.
Reports on window usage must be submitted to stock exchanges within three business days, and issuers must disclose ISIN details, such as outstanding amounts, coupon rates and schedules, on their websites and update interested parties. within 24 hours of changes.
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