Sebi allows FPIs to trade directly in bond market

Mumbai: Aiming to develop the corporate

bond market

to attract more foreign investments into the India, the markets regulator on Friday allowed select categories of foreign portfolio investors (

FPIs

) to directly trade in the debt segment of the market, bypassing brokers.

Sebi

(Securities and Exchange Board of India) also relaxed norms for

real estate investment trusts

(REITs), globally one of the popular vehicles to invest in the realty sector. It also relaxed rules for investing in the infra sector through Infrastructure Investment Trusts (InvITs), another popular investment option in the developed markets.

The Sebi board also approved foreign investors to hold up to 15% in stock exchanges in India. In July, the government had hiked this stake from the earlier ceiling of 5%. Foreign banks, insurance companies and depositories are now allowed to have higher stakes in Indian bourses.

For the first time, the Sebi board met at the National Institute of Securities Markets campus in Patalganga, about 80 km from the city. Sebi is setting up the campus to provide training and certification services to capital markets.

Sebi removed the cap on the number of sponsors for REITs and InvITs and introduced the concept of sponsor groups, lowered mandatory sponsor holdings to 15% in InvITs and also allowed REITs to invest up to 20% in under-construction assets, up from 10% earlier. The easier rules for these investment vehicles are expected to attract more companies to take these routes to raise money, which would give investors more options to invest in these sectors.

On the issue of allowing FPIs in the corporate bond markets, after the initial phase once the regulator and stock exchanges get feedback from FPIs, these entities may be allowed to trade directly in stocks as well, market players said. Currently, while all FPIs have to compulsorily trade through brokers, most of the large ones take the direct market access (DMA) route that allows them to put trades using brokers’ terminals from their own office.

The move, however, is sure to have a negative impact on domestic and foreign brokerage houses as they stand to lose out on commissions from their FPI clients.

The Sebi is also in favour of companies taking minority shareholders’ nod before assigning special rights to private equity players. The regulator feels there is a corporate governance issue in such deals and has floated a concept paper to seek market’s views.

Sebi also allowed permanent registration to credit rating agencies, merchant bankers, registrar to issues and some other market intermediaries. At present, these entities have to renew their registration every three years.

Sebi also floated another consultation paper on amending its investment advisory rules. Among the issues which the consultation paper will address are if mutual fund distributors can continue to act as investment advisers, restrictions on trading tips via electronic forms like SMS and email, and also advertisement codes for investment advisers.


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