SEBI

SEBI Modifies Reporting Of OTC Trades in Non-Convertible Securities

The OTC or over-the-counter is the trading of securities between two parties executed outside of formal exchanges & without the supervision of a stock exchange. The trading in over the counter is done in a decentralised place through decentralised seller systems. To simply put, it is the process where the bonds, stocks and other financial institutions are traded directly between the two counterparties instead of on a public stock market. The Securities Exchange Board of India, in order to provide correct information about the reporting of OTC trades in listed non-convertible securities, issued “Reporting of trades in non-convertible securities under Securities and Exchnage Board of India (Issue & Listing of Non-Convertible Securities) Regulations, 2021” on 24^th November 2022.

What were the previous provisions for Reporting of OTC trades?

The reporting of OTC trade is governed by the SEBI circular on “Operational Circular for issue & listing of Non-convertible Securities, Securitised Debt Instruments, Security Receipts, and Municipal Debt Securities and Commercial Paper” dated 10^th August 2021. The chapter XVI of the said guidelines has mandated that all the trades in non-convertible securities shall be reported only on any one of the reporting platforms provided in the Debt segment of the Stock Exchange, viz. NSE & BSE within 15 minutes of the trade. The regulated entities, listed corporates, institutional investors and all Indian financial institutions may use the request for quote platform to negotiate transactions among themselves. Further, the reporting of trades in non-convertible securities shall be made by all the persons dealing in such securities, notwithstanding whether they are SEBI-registered intermediaries or else.

What is the reason for modification?

The reason for modification is the misinformation enlisted at the time of reporting of the OTC trade. The SEBI observes that the information on OTC trades with respect to listed non-convertible securities provided by the investors to the stock exchanges is incomplete or inaccurate, which is leading the stock exchange to display incorrect and wrong information on their website.

What is the modification brought under the guidelines?

In order to provide correct and accurate information on the stock exchange website, the SEBI has decided to modify Clause 1.3 of Chapter XVI of the SEBI guidelines dated 10^th August 2021. Henceforth, the modified clause shall be read as:

“The reporting of OTC trades in non-convertible securities shall be made by all persons dealing in such securities notwithstanding whether they are SEBI-registered intermediaries or else, in accordance with the format mentioned below:

Type of Dealers ( Brokered/Direct/ IST)

ISIN

Listed or Unlisted Security

Issuer Name

Coupon (%)

Issue Description

Traded price (RS.)

Trade Yield (%)

Type of Yield ( YTC/YTP/YTM)

Traded value ( In Rs. Lakh) (In face value term)

Trade Date & Time

Settlement date

Settlement Status ( Settled or not Settled or Pending)

Reported Trade/Trade Executed on RFQ platform

Who will monitor the compliance of this circular?

The stock exchange shall be held responsible for the compliance of this circular and the chapter XVI of the Operational circular. The exchange shall also notify SEBI of any discrepancies in the reporting of OTC^[1] trades by the investors.

What is the effective date of this circular?

The provisions of this circular became effective from the date of 1^st January 2023.

Conclusion

The SEBI issued the present circular in lieu of power granted under clause 1 of Section 11 of SEBI Act 1992 r/w Regulation 55(1) of SEBI (Issue & Listing of Non-Convertible Securities) Regulations 2021. The present circular is issued to provide operational uniformity in the Reporting of OTC trade. Due to incomplete and inaccurate information in the reporting of OTC trades, difficulties are arising in the reporting structure as the stock exchanges have to list such information on their website. Henceforth, to remove this difficulty, the stock exchange has to now report the trading in accordance with the table discussed above.

1669347897648

Read Our Article: RBI Recent Guidelines on Government Securities Market