Debt securities investors: The Securities and Exchange Board of India (SEBI) has announced a proposal to introduce a liquidity window facility for investors in debt securities, with an aim to improve liquidity in the corporate bond market, especially for retail investors.
The draft circular, published on Friday, outlines a regulated mechanism that would allow issuers to offer put options on debt securities on predetermined dates.
This new facility would allow investors to resell their debt securities to the issuer before maturity, thus offering a more flexible investment environment. It would apply to future issues of debt securities, whether through public offerings or private placements intended for listing on the stock exchange.
SEBI has invited public comments on the draft circular by September 6. As per the proposal, entities issuing debt securities can opt to offer the liquidity window facility on the basis of an International Securities Identification Number (ISIN) at the time of issue. The facility would be available to eligible investors and issuers would have to obtain board approval before its implementation.
Term of one year
The liquidity window will only be offered after one year from the date of issue, and issuers must determine the eligibility criteria for investors accessing the facility. This could be limited to retail investors or extended to all investors holding the securities in dematerialised form.
SEBI has stipulated that the liquidity window should cover at least 10-15 per cent of the final issue volume of the debt securities. Issuers can also set sub-limits for each liquidity window period, and any excess demand will be accepted on a proportionate basis.
To keep investors informed, the liquidity window will be open for three business days on a monthly or quarterly basis, as decided by the issuer. Issuers must disclose the liquidity window schedule in the offer document and notify investors at the beginning of each financial year via SMS or WhatsApp.
In addition, issuers must notify the stock exchanges, debenture trustees and depositories within three business days of the details of the securities redeemed during each liquidity window. Information regarding the availability and use of the liquidity window will also be made publicly available on the websites of the relevant stock exchanges and depositories.
(With PTI inputs)
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