INDIA: SEBI Review of Financial Close Out and Auction Framework for Corporate Bonds

Monday February 13 2017

The Securities and Exchange Board of India has issued guidelines for providing dedicated debt segments in the stock exchanges for trading, clearing and settlement of debt securities including trading, clearing and settlement of corporate bonds.

Accordingly, para 8 of the circular no CIR/MRD/DP/ 27 /2013 dated September 12, 2013 has been amended to provide the following:

In case of shortage of delivery, stock exchanges/clearing corporations may conduct financial close-out. The financial close out shall take place at the highest price on the Trade date (which becomes the trade price) with a 1% mark-up on trade price.

Furthermore, Exchanges and Clearing Corporation shall introduce a uniform auction mechanism to deal with settlement shortages by March 31, 2017.

Stock Exchanges have been directed to take necessary steps and put in place necessary systems for implementation of the circular, make necessary amendments to the relevant bye-laws, rules and regulations for the implementation and bring the provisions of the circular to the notice of the brokers of the stock exchange.
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