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FIMMDA Reporting Platform for Corporate Bond Transactions 

FIMMDA Reporting Platform for Corporate Bond Transactions

The Fixed Income Money Market and Derivatives Association of India (FIMMDA) is a key player in the financial industry. The fixed income, money market, and derivatives market participants in India are represented by the industry group FIMMDA. Here, we’ll look into the FIMMDA’s duties, goals, and importance in order to throw light on how it has influenced India’s financial system. Also, this blog will discuss the reporting guidelines of FIMMDA in detail.

What is Fixed Income Money Market and Derivatives Association?

Fixed Income Money Market and Derivatives Association of India is a self-regulatory organisation that was created in 1998 and is approved by both the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI). The development and regulation of India’s fixed income and derivatives market is its main goal. The FIMMDA serves as a forum for market participants to come together, cooperate, and advance the development and effectiveness of the Indian financial sector.

“Corporate Bond Repo Reporting Platform” or “CBRRP” refers to the FIMMDA’s web-based reporting platform for gathering and disclosing information about market repo transactions made in connection with corporate bonds. 

Functions of Fixed Income Money Market and Derivatives Association

Within the Indian financial market, Fixed Income Money Market and Derivatives Association carries out several essential tasks some of its primary duties are:

  • Market Development: The FIMMDA promotes the growth of the Indian derivatives, money market, and fixed-income markets. To help these markets expand and remain stable, it develops regulations, rules, and suggestions.
  • Standardisation: The FIMMDA seeks to standardise trading practices, market norms, and documentation for fixed-income and derivatives transactions. It improves market efficiency and transparency by establishing uniformity. 
  • Market Education: The FIMMDA is essential in informing market players on the various financial instruments, risk management strategies, and regulatory frameworks. To improve the knowledge and abilities of professionals in the business, it holds seminars, workshops, and training sessions.
  • Policy Advocacy: FIMMDA speaks for its members’ interests and interacts with regulatory bodies to influence laws and regulations that advance the growth and integrity of the fixed-income industry.

Significance of Fixed Income Money Market and Derivatives Association

Fixed Income Money Market and Derivatives Association is crucial in India’s financial system. The following points help to clarify its significance:

  • Market Stability: The standardisation efforts and policy advocacy of the FIMMDA help to keep the fixed income and derivatives market stable. It reduces risks and uncertainties by developing best practices and rules, resulting in a strong and stable financial environment.
  • Investor Confidence: Investors are confident as a result of FIMMDA’s emphasis on market integrity and investor protection. Market participants can make educated investment decisions due to the association’s work in education and awareness raising.
  • Industry Collaboration:FIMMDA provides a forum for industry participants to communicate and work together to solve problems. It encourages healthy competition, knowledge exchange, and innovation in the fixed-income and derivatives sector by bringing market participants together.
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Who should invest in corporate bonds?

Business and investment opportunities are abundant in India. People have started buying corporate bonds in greater numbers recently, and this trend is anticipated to continue in the years to come. One of the various investing alternatives is corporate bonds, but who should invest in them?

  • Corporate bonds are an option for investors searching for market exposure. This is due to the fact that corporate bonds provide stability and income, two important things to consider when choosing an investment.
  • Corporate bonds are an option for investors searching for a different type of fixed-income asset. This is so because corporate bonds are less risky than equity investments while providing greater interest rates than government bonds.
  • Potential investors should think about the issuer’s financial soundness as well as the bond’s coupon rate and maturity date when deciding whether to invest in corporate bonds.
  • Investors can also think about buying corporate bonds if they want to diversify their investments.

Reporting of Eligible Corporate Bond Transactions

The following are the requirements for corporate bond Participants to report an Eligible CBRRP Transaction: 

  • Only transactions involving counterparties who are also CBRRP members and that have been completed in repo deals shall be disclosed on the CBRRP by CBRRP Participants.
  • A CBRRP Participant’s reported repo transactions must always be with counterparties with whom the Participant has a current global master repurchase agreement or such agreement as may occasionally be required by the Market Regulator.
  • The eligible Repo transaction would be reported on CBRRP by both the borrower and the lender. The platform would then match the transaction internally, and after matching, market-related information would be posted on the platform and the FIMMDA website.

Time Frame for Reporting the Transactions

  • Transactions made during CBRRP system hours: Unless otherwise specified in these Rules, a CBRRP Participant who is obligated to report Eligible CBRRP Transaction information on the CBRRP must do so within 15 minutes of the trade’s execution. On a business day, the CBRRP would be made available to CBRRP Participants between the hours of 9:00 and 17:45, and the Eligible CBRRP Transaction would need to be recorded during those hours. 
  • A valid CBRRP transaction that was carried out but not reported: According to the plan outlined by RBI, all qualified CBRRP transactions must be disclosed on FIMMDA’s CBRRP platform. The following business day reporting of transactions would not be allowed on the CBRRP.

Details that should be reported 

The transaction must report the following critical information:

  • (i) Member Ref
  • (ii) Borrow/Lend Nature of Deal 
  • (iii) ISIN Description 
  • (iv) Counterparty Information 
  • (v) Bond’s rating 
  • (vi) Sett Type
  • (vii) Date and time of the deal 
  • (viii) Initial Leg Cost 
  • (ix) Consideration for the first leg (Amount Lent/Borrowed) 
  • (x) Interest Rate on Repo 
  • (xi) Intermediary information (Direct/Brokered) 
  • (xiii) Repo Tenor 
  • (xiii) Trading Name – The CBRRP Participant must additionally provide any additional information that may occasionally be needed to comply with applicable law. 
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Order Modification and Cancellation 

  • Fixed Income Money Market and Derivatives Association shall have absolute discretion to allow Members to modify and/or cancel their orders. 
  • A member may be permitted to modify or cancel its transaction, provided that the reported transaction has not yet been matched. 
  • Unmatched transactions shall be modified by effecting changes in such input parameters in the manner and subject to such conditions as specified by FIMMDA from time to time.

Cancellation of Matched Trades 

  • a) The Members may ask for the cancellation of their matched trades at FIMMDA’s sole discretion. Both Counterparties to the trade must submit such a request to FIMMDA for FIMMDA to have the authority to revoke the matched trade.
  • b) To safeguard the interests of members and ensure proper deal-matching regulation, FIMMDA may, in its sole discretion or on behalf of RBI, suo moto annul deals at any time if it determines that the deals in question were tainted by fraud, a material error, misrepresentation, market or price manipulation, or another criminal offence. 

Service termination for CBRRP

  • Fixed Income Money Market and Derivatives Association has the right to stop providing CBRRP service after giving notice to its members, either in writing or by posting the notice online. 
  • A CBRRP participant may end their reporting duties under the CBRRP system by notifying FIMMDA1 in writing of their intention to do so. When FIMMDA acknowledges receipt of the notice and notifies the appropriate CBRRP Participant of its acceptance of the termination request, the termination will become effective. Regardless of everything stated in this clause, the CBRRP participant’s rights and responsibilities that existed before such termination shall remain unaffected in any way. 
  • FIMMDA reserves the right to refuse any CBRRP Participant the ability to report the trade on the CBRRP system if the CBRRP Participant violates the Applicable Law about the CBRRP system, breaches agreements made with FIMMDA, and/or fails to pay promptly for services rendered by the CBRRP system. 
  • If a CBRRP participant is prohibited or rendered ineligible to participate in or to undertake a repo transaction in corporate bonds in accordance with the standards and eligibility criteria set by RBI from time to time, FIMMDA may cancel the participant’s membership unilaterally or in another manner.
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Conclusion

India’s Fixed Income Money Market and Derivatives Association (FIMMDA) is a key player in determining the country’s financial environment. As a business organisation acknowledged by regulatory bodies, FIMMDA plays a crucial role in developing a strong and successful fixed-income and derivatives market in India.

FAQs:-

  1. What is FIMMDA?

    FIMMDA is a self-regulatory organisation that was created in 1998 and is approved by both the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI). The development and regulation of India's fixed income and derivatives market is its main goal. The FIMMDA serves as a forum for market participants to come together, cooperate, and advance the development and effectiveness of the Indian financial sector.

  2. What does the trade reporting and confirmation mechanism for FIMMDA mean?

    “F-TRAC” stands for FIMMDA Trade Reporting and Confirmation System, which is used to record and report trades
    a. In outright corporate bond trades in the secondary market.
    b. Repo transactions in corporate bonds; and
    c. Certificate of deposit and/or commercial paper transactions in the secondary market.

  3. What role does the FIMMDA play?

    Within the Indian financial market, FIMMDA carries out a number of essential tasks. Some of its primary duties are:
    a. Standardisation,
    b. Market Development,
    c. Advocacy for policy, and
    d. Market Education.

  4. What values does the FIMMDA promote?

    The Fixed Income Money Market and Derivatives Association of India (FIMMDA) is a full form of FIMMDA. It is an organisation of primary dealers, financial institutions, and commercial banks.

  5. How are corporate bonds traded in India?

    A broker, banker, or bond trader in the main market can help you buy corporate bonds or deposits. Bonds are also available for purchase over the counter. For effective decision-making, the intermediary provides coupon rate, face value, tenor, credit rating, allotment, and redemption dates.

  6. What does the FIMMDA Code of Fair Practices say?

    The FIMMDA Code of Fair Practises (CFP) was created to provide a professional culture and a set of shared standards to support the Market's integrity and efficient operation.

  7. What is a bond screener?

    With the help of the robust comparison tool Bond Screener, you may look for bonds and quickly filter them based on a number of criteria. Bond Screener can be accessed by selecting it from the left toolbar or by selecting Instruments Bond Screener from the top menu.

  8. What is the information about corporate bonds in India?

    Corporate bonds are debt instruments with a maturity of more than one year that are issued by corporations. The majority of the time, when we invest in stocks, we become equity owners in the company, but when we invest in corporate bonds, we won’t own any equity there.

References

  1. https://www.fimmda.org/

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