What changed
Previously, banks could not directly become members of stock exchanges for corporate bond transactions. This circular allows SCBs to join SEBI-approved exchanges for proprietary trading in corporate bonds, subject to exchange membership criteria and SEBI norms.
What it means for you
Banks can now trade corporate bonds directly on exchange platforms, enhancing price discovery and market depth. This move supports earlier measures like repo in corporate bonds, mandatory clearing, and credit default swaps, further deepening the corporate bond market.
What you must do
- Review membership criteria of SEBI-approved stock exchanges and ensure compliance before applying.
- Align internal policies to handle proprietary corporate bond trades on exchanges, including risk management and reporting.
- Coordinate with SEBI and exchange authorities to meet all regulatory requirements for membership.
- Update operational teams on new trading capabilities and ensure systems are ready for exchange-based bond transactions.
Who it affects
Scheduled Commercial Banks (excluding RRBs), Treasury and trading desks of banks, SEBI-approved stock exchanges, Corporate bond market participants
Can banks trade on behalf of clients using this membership?
No, this permission is specifically for proprietary transactions only, not for client trading.
Do banks need separate approval from RBI to become exchange members?
No separate RBI approval is needed, but banks must satisfy the stock exchange's membership criteria and comply with SEBI and exchange regulations.
What is the main goal of this circular?
To enhance transparency and liquidity in the corporate bond market by allowing banks to trade directly on exchange platforms.