India’s securities regulator plans to develop bond exchange-traded funds as well as derivatives linked to corporate bond benchmarks to boost retail participation in the debt market.
The Securities and Exchange Board of India (Sebi) also plans to create a market-making framework to improve retail participation and liquidity in the bond market, Tuhin Kanta Pandey, chairman of the securities regulator, said in a speech at a bond conference in Mumbai on May 29.
“We are working towards further developing bond ETFs and derivatives on corporate bond indices. These can improve liquidity, allow retail investors to access debt markets with smaller ticket sizes, and help institutions hedge interest rate risks,” he said.
But he pointed out that investor education will be key to draw retail interest.
“Bonds have their own vocabulary, coupon, yield, duration, rating, and different types of risks. We must make this vocabulary investor-friendly,” he said.
Pandey also disclosed that Sebi is exploring a pilot project for tokenisation of corporate bonds to assess whether the technology can enable faster settlement and improve transparency.
“We must move carefully, but we must remain open to useful innovation,” he said.
