The ISIN, which consists of 12 characters, is used to uniquely identify securities such as stocks, bond warrants and commercial papers.
With a view to boost liquidity in the corporate bond market, the Securities Exchange Board of India (SEBI) on Friday suggested further limiting the number of ISINs for such bonds issued on a private placement basis.
The ISIN (International Securities Identification Number) code, which consists of 12 characters, is used to uniquely identify securities such as stocks, bond warrants and commercial papers.
“Given that issuers are not currently using even half of the maximum ISINs allotted to them, it is felt that further capping of ISINs would not only reduce fragmentation in the bond market and increase the liquidity premium but also increase the liquidity premium of issuers and It will help both investors equally.” SEBI said in a consultation paper.
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Accordingly, it has proposed to further limit the number of ISINs maturing per financial year for corporate bonds issued on private placement basis.
The regulator has suggested that six ISINs maturing per financial year should be allowed for plain vanilla debt securities as against 12 at present. Also, it has proposed to set a limit of five ISINs for structured debt securities.
In addition, it is proposed to impose a limit of six ISINs for capital gains tax debt securities by authorized issuers under the Income Tax Act. The current limit is 12.
SEBI has sought comments from the public on the consultation paper by November 21.
Issuers have represented that capping of ISINs and re-issuance of bonds in the same ISIN has helped them in better projection of cash flow requirements and thus enable them to effectively implement their Asset Liability Management (ALM) requirements as per the consultation paper. capable of being completed.
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They have also said that, procedurally, it has helped reduce the multiplicity of formalities such as filing of offer documents, creation of ISINs and tracking contracts.
“It is observed that in case of Government Securities (G-Secs), the outstanding amount per ISIN is very high and a new ISIN is issued only when the outstanding balance in that ISIN reaches a specified limit. As a result, There is less fragmentation and hence increased liquidity and traction for G-Sec trading,” noted SEBI.
Further, the regulator said in the consultation paper that if the number of ISINs per issuer is limited, the fragmentation across various bonds will reduce and is expected to increase liquidity in the secondary market.
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