Online Bond Platform Providers (OBPPs)
Prelims:
Indian Economy
Mains:
GS Paper III – Indian Economy
Current relevance:
The Securities and Exchange Board of
India (SEBI) has proposed an advertisement code for Online Bond Platform
Providers (OBPPs) to ensure that advertisements remain fair, balanced and
conducive to informed investment decisions, while improving investor awareness
about bonds as an asset class.
About Online Bond
Platform Providers (OBPPs):
Background & Regulatory Framework:
1.
Online Bond
Platforms (OBPs) developed as
digital channels enabling investors, particularly non-institutional
investors, to access debt securities.
2.
Growing
participation of retail and other non-institutional investors highlighted the
need for an appropriate regulatory and investor-protection framework.
3.
Initially
operating outside SEBI’s direct regulatory framework, these platforms raised
concerns regarding transparency, disclosures, grievance redressal, investor
protection and settlement risks.
4.
Consequently, SEBI
introduced a dedicated regulatory framework in November 2022 under
Regulation 51A of the SEBI (Issue and Listing of Non-Convertible Securities)
Regulations, 2021.
5.
Under the
framework, an OBPP must be a company incorporated in India and registered as
a stock broker in the debt segment of a recognised stock exchange.
Key Features:
1.
The basic
purpose of an online bond platform is to provide an electronic avenue through
which investors can discover, compare and invest in debt securities.
2.
Under SEBI's
framework, OBPPs can offer specified products, including:
i.
Listed debt
securities
ii.
Listed
municipal debt securities
iii.
Listed
securitised debt instruments
3.
The framework
seeks to provide appropriate safeguards relating to disclosures, investor
grievance redressal, risk management, conflicts of interest, data governance,
reporting and monitoring.
4.
SEBI further
modified the OBPP regulatory framework on 14 August 2026 as part of
measures aimed at promoting ease of doing business.
Working Mechanism:
1.
An Online Bond Platform
Provider (OBPP) provides a digital interface where investors can discover
and compare listed debt securities offered by issuers or sellers, place
investment orders, and complete transactions through the recognised stock
exchange and clearing corporation infrastructure, which facilitates the
subsequent settlement of the securities and funds.
2.
A key principle
behind SEBI's framework was that transactions undertaken through these
platforms should use the trading and settlement infrastructure of stock
exchanges and clearing corporations, helping mitigate payment and
settlement risks.
3.
Importantly, an
OBPP should not be understood as the issuer of the bond itself. It
primarily provides the online interface through which eligible fixed-income
securities can be accessed.
Significance:
1.
Enhances retail
participation: OBPPs provide non-institutional
investors easier access to the corporate bond market, widening the investor
base.
2.
Deepens the bond market: Greater investor participation can improve activity in the secondary
bond market and contribute to the development of India’s corporate debt
market.
3.
Promotes transparency: Disclosure requirements provide investors with relevant
information on risk factors, credit ratings and bond-related documents,
facilitating informed investment decisions.
4.
Strengthens investor
protection: SEBI’s regulatory framework improves
grievance redressal, disclosure standards, operational transparency and payment
and settlement safeguards.
5.
Broadens financing
channels: A stronger corporate bond market
provides an alternative source of financing alongside traditional bank-based
lending, contributing to a more diversified financial system.
Source: THE HINDU - https://www.thehindu.com/incoming/sebi-proposes-advertisement-code-for-online-bond-platforms/article71374557.ece