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Repo Market in Corporate Debt

Repo transactions enable dealers to finance long positions and cover short positions allowing them to respond to investor's needs quickly. In Indian, Government securities are the most preferred instruments for repo transactions, where as there are no takers for
repo transactions where corporate bonds are used as collaterals, as the corporate bond markets do not possess some of the basic requirement to get qualified for repo purpose.

Private Placement of Corporate Debt

In India, the private placement route is popular due to its tailor-made deals, short and simple issuance procedure and lower cost of issuance. Thus disclosure should be made mandatory irrespective of the number of subscribers. The gap existing here needs to be plugged with the help of respective regulatory bodies or by expanding the jurisdiction of SEBI. Private placement of debt should be encouraged if they are issued to institutional investors as well as other institutions but not to the retail investors and carried out by bond managers.

A Sound, Robust and Safe Market Infrastructure

Standardized robust trading rules and a safe infrastructure help reduce hidden transaction costs and promote market liquidity. Safety in trading and settlement is a prerequisite for the existence of deep and liquid markets as more investors will be willing to trade in a safe market. Computerized clearing and settlement system should be set up for the corporate bonds. For widening the investor's base and expanding the market, steps should be taken to link it to clearing houses of other countries as done by Hong Kong where Central Money Market Unit (CMU) is linked to the Euro clear and Cedel.

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* Contributed by: -
Jayanta Das & Kartavya Soni,
ICFAI Business School, Hyderabad.