The Securities Exchange Board of India (SEBI) on October 19, 2022, issued a circular on the Request for Quote (RFQ) platform for trade execution and settlement of trades in listed Non-convertible Securities, Securitised Debt Instruments, Municipal Debt Securities, and Commercial Paper.
SEBI had introduced the framework for a dedicated debt segment vide circular no. CIR/MRD/DP/03/2013 dated January 2013, which permitted the stock exchanges to offer electronic, screen-based trading providing for order matching, request for quote, negotiated trades, etc.
Request for Quote (RFQ) is an electronic platform to enable sophisticated, multi-lateral negotiations to take place on a centralized online trading platform with straight-through-processing of clearing and settlement to complete a trade.
The following feature of RFQ have been stated:
• The RFQ platform is a system or interfaces for inviting and/ or giving quotes on an electronic platform.
• A participant who seeks quote(s)is termed an Initiator and a participant who acts/ responds to the quote requests of the Initiator is termed a Responder.
• A participant may request other participants for a quote for eligible securities.
• The Initiator has the option to place quote(s) by disclosing its name or anonymously.
• The quote can be placed to an identified counterparty (i.e., ‘One to One’ (OTO) mode) or to all the participants (i.e., ‘One to Many’(OTM) mode).
• The platform provides the participants a range of options to seek a quote and to respond to a quote, while keeping an audit trail of all interactions i.e., quoted yield, mutually agreed price, deal terms, etc.
• The quotes will be bilaterally negotiated between the counterparties, based on specified parameters. The acceptance of a quote by a participant will be considered a mutual agreement between the parties for the given deal.
The following securities are eligible for being traded on the RFQ platform:
Non-convertible securities, Securitised Debt Instruments, Municipal Debt Securities, Commercial Paper, Certificate of Deposit, Government Securities, State Development Loans, Treasury Bills, and any other instrument, as may be specified by Stock Exchanges in consultation with SEBI.
The SEBI has received comments from market participants requesting that stock brokers be allowed to submit bids on behalf of their customers in order to enable more market participation in the corporate bond market. Following careful research and deliberation, it was decided to allow stock brokers registered with the debt segment of the Stock Exchange(s) to place/ request bids on the RFQ platform on behalf of the client(s), in addition to the existing option of making bids in a proprietary capacity.
This circular will come into force with effect from January 01, 2023.
[Circular No. SEBI/HO/DDHS/DDHS_Div1/P/CIR/2022/142]
