Mumbai: The Reserve Bank of India (RBI) and domestic clearing authorities could consider requests from global investors for steps such as an extended reporting window for overseas players as inclusion in global bond indices is expected to draw more international funds to the local bond market.
“There will be an increase in bond volumes as we head near the JP Morgan index inclusion in June,” a source aware of the matter said. “There could be a need for authorities to see if it is necessary for foreign trade reporting time or trade time on the Clearing Corporation of India (CCIL) to be extended.”
CCIL, which hosts the trading platform for government bonds, is supervised by the RBI. An email sent to the central bank remained unanswered until the publication of this report.
Last week, JP Morgan said that India would be included in its Government Bond Index Emerging Markets global index suite starting June 2024, a development that is expected to bring in over $20 billion of stable flows to India’s sovereign bond market over the next couple of years.
“Global investors are clearly fine with the Indian bond trading and clearing infrastructure,” said another banking industry executive. “As of now, many funds are working out the modalities of how to function after the index inclusion starts. If there are requests on operational fronts, they could be considered.”
Following JP Morgan’s move, bond traders expect similar announcements from competing index providers, such as the Bloomberg Global Aggregate Index and the FTSE Emerging Markets Government Bond Index.
At present, CCIL’s Negotiated Dealing System-Order Matching (NDS-OM) bond trading platform functions from 9 am to 5 pm, while the reporting window for trades conducted only between foreign investors after the end of domestic hours is 5 pm to 8 pm.
“There is an NDS-OM web version as well. Essentially custodians give securities to FPI (foreign portfolio investor) clients who trade; around 3-4% are doing secondary market trades at present,” another source said.
“After 5 pm, FPIs can only do bilateral trades and then report to the CCIL by 8 pm. If there is a significant uptick in FPI registrations with the Sebi – for example from more hedge funds – and a need to account for more time differences, there could be requests to extend that time,” the source said.
