The Hindu Business Line : Steps to expand market for corporate bonds

In my Budget Speech of 2006, I had informed the House that, on the basis of the R.H. Patil Committee Report, we shall take steps to create an exchange-traded market for corporate bonds. Both Bombay Stock Exchange and National Stock Exchange have created platforms for trading in corporate bonds.

I intend to move forward by taking some more measures to expand the market for corporate bonds. Hence, I propose to:

• take measures to develop the bond, currency and derivatives markets that will include launching exchange-traded currency and interest rate futures and developing a transparent credit derivatives market with appropriate safeguards;

• enhance the tradability of domestic convertible bonds by putting in place a mechanism that will enable investors to separate the embedded equity option from the convertible bond and trade it separately; and

• encourage the development of a market-based system for classifying financial instruments based on their complexity and implicit risks.

The fear of the Permanent Account Number (PAN) has virtually disappeared. PAN is now the sole identification number for all participants in the securities market.

I propose to extend the requirement of PAN to all transactions in the financial market subject, however, to suitable threshold exemption limits.

Our stock exchanges provide national electronic trading platforms for securities transactions. Yet, we do not have a seamless national market for securities because of differences among States on the scope and applicability of rates of stamp duty.

Hence, I propose to request the Empowered Committee of State Finance Ministers to work with the Central Government to create a truly pan Indian market for securities that will expand the market base and enhance the revenues of the State Governments.

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