SEBI changes framework on non-convertible debt securities

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SEBI changes framework on debt securities

The Securities and Exchange Board of India (SEBI) plans to review the norms on the electronic book provider (EBP) platform, using it to issue and list non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper.

The move is aimed at protecting the interest of securities investors, and to regulate and run the securities market better, said the circular on the decision from the markets regulator. The provisions of this circular will come into effect from 1 January 2023.

The decision to tweak the EBP regulations followed widely reported concerns that bidders who use specialised technology were edging out those with higher bids, the process which traders call “fastest finger first” after a popular television game show.

“SEBI has received representations from various market participants, requesting a review of the provisions pertaining to the EBP platform to address the issues of ‘fastest finger first’ (viz. allotment based on time priority in bidding for issuances with fixed parameters), certain bidders not getting allocations despite having worked on the issuance pre-listing, high ratio of green shoe to base issue size, limits on arrangers placing bids on behalf of clients, etc.,” said the circular.

To address the “fastest finger first” concern, the book building process has to be modified to ensure allocations based on the “best bid” rather than the bidder with the best technology for placing the fastest bid, the circular by SEBI stated.

Certain issuers have called for introducing an “anchor investor” as an option to enable them to assess the demand and receive assurances from “certain prospective investors towards subscription”, it added.