Sebi steps in to fortify bond mkts

AT A TIME when retail participation in the bond market has been rising at a fast clip, the latest release from the Securities and Exchange Board of India, cautioning against unregistered online bond platform providers (OBPPs), is expected to serve as a wake-up call and put pressure on unregulated players seeking registration.

- AYANTI BERA & CHRISTINA TITUS

"Some players outside the OBPP framework are running unregulated platforms to sell bonds, which is not permitted," said Sanjeev Kumar, Co-CEOBondVue, a Sebi-registered OBPP.

Kumar's main worry is that investors lured by returns of 14-15% transfer money through such informal channels may get duped if the trade does not get settled through regulated systems. "These platforms hold the bonds on their books and transfer them directly to buyers, unlike OBPP transactions that settle securely through clearing corporations," he explained.

The bigger concern is that many platforms advertise higher returns on low-rated bonds without fully disclosing associated risks, which mislead investors about the true nature of these bonds. For example, a 3-year BBB-rated bond offers a yield of around 10.3%, while an AAA-rated paper of similar tenure offers a yield of 6.7%. For comparison, fixed deposits of the same tenure offer 6.25%-6.60%.