Undertake 10% secondary market trades in corporate bonds on RFQ platform: IRDAI tells insurers
Request for Quote (RFQ) is a platform for interaction among market participants who wish to negotiate transactions among themselves
September 25, 2020 / 08:10 PM IST
The insurance regulator has asked insurers to undertake at least 10 percent of their total secondary market trades in corporate bonds through the one-to-many mode on the RFQ platform available on the BSE and National Stock Exchange (NSE).
The Insurance Regulatory and Development Authority of India (IRDAI) said that the 10 percent limit will be reckoned on the average of secondary market trades by value. This will be applicable in the immediately preceding three months on a rolling basis.
These rules come into effect from November 1. When it comes to insurers, IRDAI said the concurrent auditor has to confirm compliance to this order.
Request for Quote’ (RFQ) is a platform for interaction among market participants who wish to negotiate transactions among themselves. This platform is a participant to participant model where an initiator may request other participants for a quote in corporate bonds, securitised debt instruments, municipal debt securities, government securities, state development loans, treasury bills, commercial papers, certificates of deposits, among others.
This platform effectively automates or provides an electronic form of transacting in over the counter deals. The RFQ platform provides users a range of options to seek a quote and to respond to a quote, while keeping an audit trail of all the interactions including quoted yield, mutually agreed price, and deal terms. This is to bring pre-trade transparency for OTC transactions in eligible securities.
Sebi has implemented RFQ through the BSE and the NSE. In July, the markets regulator had mandated all mutual funds (MFs) to undertake 10 percent of their total secondary market trades of corporates bonds through RFQ to start with.
IRDAI said since this will bring transparency and liquidity in the corporate bond segment, the insurance sector has also been asked to follow the path of MFs.