Framework for Online Bond Platform Providers (OBPPs)

Registration and regulatory framework for Online Bond Platform Providers (OBPPs)

1. During the past few years, there has been an increase in the number of Online Bond Platforms (OBPs), offering debt securities (obtained through subscriptions to public issues/private placements and through secondary market), to non-institutional investors. Most of such OBPs are fintech companies or are backed by Stock brokers/ SEBI registered intermediaries.There has been a significant increase in the number of registered users who have transacted through such OBPs.
   
2. While OBPs provide an avenue for investors,particularly non-institutional investors to access the bond market, their operations were outside SEBI’s regulatory purview.
   
3. With the bond market offering tremendous scope for development, particularly in the non-institutional space, there is a need to place checks and balances in the form of transparency in operations and disclosures to the investors dealing with such OBPs, measures for mitigation of payment and settlement risk, availability of redress mechanism in case of complaints, etc.
   
4. Thus, in order to streamline the operations of these OBPs and to facilitate the participation of investors in the bond market, there was a need to provide a regulatory framework for the working of such OBPs.
   
5. Pursuant to discussions with market participants and stakeholders, vide notification dated November 09, 2022, a framework has been prescribed for entities operating/ desirous of operating as OBPPs under regulation 51A of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (‘NCS Regulations’):
   5.1. Such entity shall be a company incorporated in India and register itself as a stock broker in the debt segment of the Stock Exchange(s);
   5.2. Anentity acting as an OBPP on or prior to this circular coming into force, shall cease to offer products or services or securities on its OBP other than the following:
   5.2.1.Listed debt securitiesand
   5.2.2.Debt securities proposed to be listed through a public offering. Such OBPP shall divest itself of offerings of other products or services or securities.
   5.3.Such entities, in addition to complying with regulation 51A of the NCS Regulations,shall ensure compliance with the requirements specified in Annex -A to this circular.
   
6. The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 55 (1) of the SEBI (Issue and Listing of Non-convertible Securities) Regulations, 2021 to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.
   
7. This circular shall come into force with immediate effect.
   
8. An OBPP who fails to comply with any of the provisions of this circular, shall be liable for action under the SEBI Act and any rules,regulations and circulars issued thereunder.
   
9. The Stock Exchange(s)are directed to :
   9.1.bring the provisions of this circular to the notice of the Stock Brokers and also disseminate the same on their websites;
   9.2.make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above directions in coordination with one another to achieve uniformity in approach and communicate regarding the same to SEBI; and
   9.3.monitor the operations carried out by an OBPP.
   
10. The provisions of this circular shall be incorporated as Chapter XXI of SEBI Operational Circular for issue and listing of Non-Convertible Securities (NCS), Securitised Debt Instruments (SDI), Security Receipts (SR), Municipal Debt Securities and Commercial Paper (CP) dated August 10, 2021 as amended from time to time.

Annexure

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