Sebi allows FPIs to directly trade in corporate bonds

Mumbai: With an aim to deepen corporate bonds market by attracting more overseas funds, markets regulator Sebi  decided to allow well-regulated Foreign Portfolio Investors (FPIs) to trade directly trade in these securities without any broker.

Currently, FPIs can trade in Indian markets only through brokers who are registered with the stock exchanges as their members.

Under the new proposal approved by Sebi's board here today, the Securities and Exchange Board of India (Sebi) would take up the matter with the government to permit FPIs to become members of the stock exchanges for their proprietary trading.

In a statement, Sebi said it has decided to allow Category I and Category II FPIs to have an option to directly access the corporate bond market without brokers, as has been allowed to domestic institutions such as banks, insurance companies and pension funds.

"Access to Over the Counter (OTC), Request for Quote and Electronic Book Provider (EBP) platforms of the recognised stock exchanges will be provided to FPIs only for proprietary of FPIs will help in deepening the corporate bond market," Sebi said.

Sources have said that the FPIs can also be given direct access to other segments of the capital markets at a later stage, depending on the response in the corporate bonds market.

The revised norms would be applicable for Category-I FPIs that include sovereign wealth funds and central banks as well as Category-II FPIs, which include mutual funds and banks.

However, hedge funds, individuals and other high risk foreign investors will not get this facility.

The move is aimed at boosting foreign inflows in Indian capital markets. However, there has been concern from some quarters that it would have negative impact on domestic brokerage houses as they will lose out on revenue.

Currently, investments made by Sebi-registered FPIs in domestic capital market stands at Rs 11.5 lakh crore. This include Rs 8.45 lakh crore in equities and Rs 3.06 lakh crore in debt.