Sebi Proposes Mandatory E-Book for Private Debt Issues

New Delhi, Mar 20 (PTI) Markets regulator Sebi on Thursday proposed making electronic book mechanism mandatory for all private placement debt issues exceeding Rs 20 crore and is looking to expand the platform's scope to include REITs and InvITs.

The move is aimed at enhancing the efficiency of the Electronic Book Provider (EBP) platform, with an emphasis on adapting to evolving market dynamics.

In its consultation paper, Sebi has proposed making EBP mandatory for all private placement issues of the issue size above Rs 20 crore.

Currently, the mechanism is mandatory for all private placements of debt securities with an issue size of Rs 50 crore or more.

In addition, Sebi has proposed extending products on the EBP platform to infrastructure investment trusts (InvITs) and real estate infrastructure trusts (REITs). At present, there is no specific regulatory provision.

Also, it has been suggested to close the platform on bank holidays and increase the anchor portion allocation for investors, with different percentages based on ratings.

"Issuer shall disclose details of the anchor investor(s) and the corresponding quantum allocated to the EBP, along with the Placement Memorandum and the term sheet. Such anchor investors shall provide confirmation on the EBP platform of their participation by T-1 day. Amount not confirmed by any such investor shall be added back to the base issue size," Sebi suggested.

The proposal suggested reducing the Green Shoe Option limit from five times to three times the base issue size. For instance, if the base issue size is Rs 100 crore, the Green Shoe Option would be capped at Rs 300 crore, instead of the current Rs 500 crore.

Among others, it has been proposed making open bidding mandatory for issues above Rs 1,000 crore. At present, bidding can be either open or closed.

Sebi has suggested that the term 'time' should be removed, and allotment be based purely on price or yield priority.

Under the current rule, bids are allocated based on 'price-time priority' and 'yield-time priority'.

Apart from EBP, Sebi has proposed to simplify the operational process relating to yield to price computation on the Request for Quote (RFQ) platform.

Sebi has proposed cash flow dates for interest/dividend/redemption be used as per the scheduled payment date, not adjusted for holidays or day count conventions.

At present, day count conventions complicate yield to price calculations for non-convertible securities on the RFQ platform.

Besides, the regulator has suggested that issuers should be required to submit detailed cash flow schedules at the time of ISIN activation and update any changes within one working day.

Under the current rule, issuers do not need to disclose detailed cash flow schedules in the centralised corporate bond database.

The proposals are based on suggestions given by two separate Working Groups, set up by Sebi, to enhance the efficacy of the EBP platform and to further improve liquidity and price discovery mechanisms.

RFQ Platform was created with the goal of transforming corporate bond market trading from traditional OTC-based to an electronic trading platform.

RFQ is an electronic platform to enable sophisticated, multilateral negotiations to take place on a centralised online trading platform with straight-through-processing of clearing and settlement to complete a trade.

The Securities and Exchange Board of India (Sebi) has sought public comments till April 10 on the proposals.