SEBI Proposes New Liquidity Window Facility For Debt Securities

The Securities Exchange Board of India has proposed to introduce a new liquidity window for investors, particularly for retail in debt securities through stock market mechanism.

The the new liquidity window facility proposes to mitigate issues by providing put option on debt securities, via regulated mechanism for issuers, at pre-specified dates or intervals, the market regulator said in its draft circular released on Friday. This proposal comes as it aims to deepen India's corporate bond market.

It will allow issuers to give put options to investors, which will enable them to sell their debt securities back to the issuer before maturity. It can be given only for prospective issuances of debt securities through public issue process or on a private placement basis, which proposed to be listed.

The SEBI has invited public comments on the draft circular till September 6.

"An entity issuing debt securities, which are proposed to be listed, may at its option/ discretion provide the liquidity window facility for the debt securities, on an International Securities Identification Number basis, at the time of issuance of such debt securities and make such Liquidity Window facility available to the eligible investors in such debt securities," SEBI said in the circular.

The regulator outlined the issuers that choose to provide this facility will first obtain approval from their board of directors. The facility will be monitored by the stakeholders relationship committee in companies with listed equity.

For pure debt-listed entities, the board or a designated committee would oversee the process.

Issuers must determine the eligibility of investors who can access the facility, which may be restricted to retail investors or extended to all investors holding the securities in demat form, SEBI noted.

The markets regulator also proposed that there should not be less than 10% or 15% the final issue size of the debt securities. In addition, issuers could set sub-limits for each liquidity window period, with any excess demand being accepted on a proportionate basis.

To ensure that investors are informed, SEBI said the 'liquidity window will be kept open for three working days on a monthly/ quarterly basis at the discretion of the issuer'.

The issuers will be required to disclose the schedule of the liquidity window in the offer document. Further, investors will be notified of the availability of the facility at the start of each financial year via SMS or WhatsApp messaging.

The markets watchdog has also mandated that issuers report the details of the securities redeemed during each liquidity window to the stock exchange, debenture trustees, and depositories within three working days.

Additionally, information about the availability and usage of the liquidity window must be made publicly accessible on the websites of stock exchanges, depositories, and debenture trustees.

(With text inputs from PTI)