Sebi Proposes Liquidity Window Facility for Bond Investors

Sebi has proposed the introduction of a new liquidity window facility for debt securities investors via the stock exchange mechanism to boost liquidity in the corporate bond market, particularly for retail investors.

The draft circular, released on Friday, outlines a regulated mechanism that allows issuers to offer put options on debt securities at predetermined dates or intervals, enabling investors to sell their bonds back to the issuer before maturity.

This facility would be available only for future issuances of debt securities through public issues or private placements intended for listing. Sebi is seeking public feedback on the draft until September 6.

The circular suggests that issuers of listed debt securities may opt to offer this liquidity window on an International Securities Identification Number (ISIN) basis at the time of issuance. The process will be overseen by the board of directors or a designated committee, with the facility available only after one year from the date of issuance.

Sebi also proposed that the facility could be limited to retail investors or extended to all investors holding securities in demat form. The liquidity window should cover at least 10 to 15 percent of the final issue size, with the option to set sub-limits for each period and proportionally accept excess demand.

To keep investors informed, Sebi stated that the liquidity window will be open for three working days monthly or quarterly at the issuer's discretion. The schedule must be disclosed in the offer document, and investors will be informed of the facility's availability at the start of each financial year through SMS or WhatsApp.

Issuers are required to report the details of redeemed securities within three working days and make information about the facility publicly accessible on the websites of stock exchanges, depositories, and debenture trustees.

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