In a bid to increase the liquidity on Request for Quote (RFQ) platform of stock exchanges and to enhance the transparency and disclosure pertaining to trading in secondary market in corporate bonds, SEBI has asked stock brokers (SBs) to undertake at least 10 per cent of their total secondary market trades by value through RFQ platforms.
This will be increased to at least 25 per cent of their total secondary market trades by April 2024.
Request for Quote (RFQ) is a trade execution platform, launched in 2020. This platform is a direct participation model where all participants trade in their own accounts.
With the recent SEBI circular to permit participation through brokers from this January, participants are now allowed to use the services of SEBI-registered brokers. The platform uses RFQ protocol where an initiator may request other participants for a quote in corporate bonds, securitised debt instruments, municipal debt securities, Government securities, State development loans, Treasury Bills, Commercial Papers and Certificates of Deposit or any other security as specified by an exchange from time to time.
The RFQ platform provides users a range of options to seek a quote and to respond to a quote, while keeping an audit trail of all the interactions i.e. quoted yield, mutually agreed price, deal terms, etc.
SEBI has been taking steps to increase the liquidity on RFQ platform of stock exchanges to enhance the transparency and disclosure pertaining to trading in secondary market in corporate bonds. Certain stipulations have been made for transactions on RFQ platform by Mutual Funds , Portfolio Management Services, and Alternate Investment Funds.