SEBI Framework for Online Bond Platform Providers (OBPPs)

November 16, 2022

Securities and Exchange Board of India (SEBI) has released a regulatory framework for the online bond platform providers (OBPPs) to streamline their operations.

What are the key features of the Framework for Online Bond Platform Providers?

Online bond platform is defined as any electronic system (other than recognized stock exchange or an electronic book provider platform) on which listed debt securities are offered or transacted. An individual who provides or operations such a platform is called as the online bond platform provider.
OBPPs are companies that are incorporated in India. The new framework requires them to be registered as stock brokers in the debt segment of the stock exchange.
After being registered as a stock broker, the OBPP is required to apply as a bourse.
In the application, the OBPP must comply with the roles and obligations, technology, and operating framework. It must put in place a KYC for on-boarding investors and sellers and ensure risk profiling of investors.
The OBPP must ensure disclosure of all instances of conflict of interest occurring due to the its transactions or dealings with related parties.
The OBPP must also have a comprehensive risk management framework that encompasses all aspects of its operations, ensuring the risks associated with its operations are accurately identified and effectively managed.
It must also provide required safeguards to respond exigencies like suspension of trading in debt securities, cancellation of orders by the investors and sellers, and system malfunctions.
The OBPP is also required to inform about the events that might disrupt activities or market abuse without undue delay.
Data related to OBPP must also be maintained in a way that they can be easily retrieved while also being confidential and secure.

Why did the SEBI issue the regulatory framework?

Bond markets provide developmental scope, especially in the non-institutional space. Their full potential can be realized only if there are checks and balances. Regulation ensures transparency in operations and disclosures to investors dealing with online bond platforms.

During the last several years, there has been an increase in the number of OBPPs offering debt securities to non-institutional investors. Most of them are fintech companies or are supported by stock brokers. Many of the registered users have made transactions via the online bond platforms, which are outside the regulatory purview of the SEBI.

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