Sebi, the capital markets regulator, prohibited online bond platform providers from providing items other than listed debt instruments on their platforms on Friday. According to a circular, the authorities also authorized them to market securities such as Government Securities, Treasury Bills, listed Sovereign Gold Bonds, listed municipal debt securities, and listed securitized debt instruments on their online bond platforms.
Online Bond Platform Providers (OBPPs) must register as brokers for stocks in the debt section of the stock exchange under the guidelines. OBPs allow investors, particularly non-institutional investors, to have access to the bond market.
While restricting the products supplied on an online bond platform, Sebi reiterated that an organization operating as an online bond platform provider would be unable to offer products or services not permitted by the regulations on its platform or any other platform website.
It further stated that an online bond platform provider's holding company, subsidiary, or associate would not use the name, brand name, or any name similar to that of the online bond platform provider to offer products and services that are not controlled by a financial sector regulator.
This follows Sebi's observation that a few OBPPs have begun operations and that certain OBPPs continue to sell items other than listed debt securities and debt securities proposed for listing via a public offering on their platforms.
Furthermore, they continue to market unlisted bonds through a separate platform or website and have not relinquished such products. Furthermore, Sebi highlighted that certain OBP providers have provided a connection on the online bond platform to another platform for transacting in unlisted bonds and other products.
NCS (Issue and Listing of Non-Convertible Securities) Regulations prohibit such practices. The Securities and Exchange Board of India (Sebi) stated that the new framework would take effect immediately. Sebi extended the deadline for firms operating as online bond platform providers to apply for registration as stock brokers by three weeks beginning February 9th.
There has been an upsurge in the number of OBPPs issuing debt securities to non-institutional investors in recent years. The majority of them are fintech firms or are backed by stock brokers. The number of registered users who have transacted using such OBP has increased significantly.
While OBPs provide a venue for investors to access the bond market, their operations fell outside of Sebi's regulatory scope, therefore the regulator announced the framework for organizations operating or wishing to operate as OBPPs in November 2022.
