Securities and Exchange Board of India

10.01.2023

Capital Market

Introduction of future contracts on Corporate Bond Indices

MANU/SSMD/0006/2023

1. In order to enhance liquidity in the bond market and also to provide opportunity to the investors to hedge their positions, SEBI had constituted a working group of representatives of NSE, BSE and MSEI to make recommendations on the matter of 'Derivatives on Bond Indices.'

2. Based on the submissions made by the working group and recommendations of Secondary Market Advisory Committee of SEBI, it has been decided to permit Stock Exchanges to introduce derivative contracts on indices of corporate debt securities rated AA+ and above. To start with, the Stock Exchanges are permitted to launch future contracts on corporate bond indices.

3. The details regarding index composition, contract specifications, position limits, risk management framework, etc. for introduction of future contracts on corporate bond indices are given at Annexure A.

4. The stock exchanges desirous of introducing such contracts shall submit a detailed proposal to SEBI for approval, inter alia, providing details relating to underlying corporate bond index, the index methodology, contract specifications, applicable trading, clearing & settlement mechanism, risk management framework, the safeguards to ensure market integrity, investor protection, surveillance systems, etc.

5. For implementation of the above, Stock Exchanges and Clearing Corporations are advised to:

5.1. take necessary steps and put in place necessary systems.

5.2. make necessary amendments to the relevant bye-laws, rules and regulations.

5.3. bring the provisions of this circular to the notice of their members and also to disseminate the same on their websites.

6. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Tags : Introduction future contracts Corporate Bond

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