SEBI vide its Circular dated on 13th April, 2023 issued for all eligible issuers of debt securities Recognized Limited Purpose Clearing Corporations Recognized Stock Exchanges Registered Depositories.
The circular states:
SEBI said, a well-functioning repo market contributes to the development of the debt securities market by way of boosting the liquidity of the underlying debt securities and allowing market participants to monetize their debt holdings without selling the underlying, thus meeting their temporary need for funds.
The development of an active repo market in debt securities may also be beneficial to the issuers as the enhanced liquidity may positively impact the yield, thereby resulting in reduced costs of raising funds to the issuers in the primary market”, it added.
In its board meeting in September 2020, SEBI had approved a proposal to facilitate the setting up of an LPCC. The board had also decided that an amount of 0.5 basis points of the issuance value of debt securities per annum be collected upfront before the listing of such securities to build the Settlement Guarantee Fund of the LPCC.
AMC Repo Clearing Limited (ARCL) has been granted recognition as LPCC by SEBI. RBI also gave necessary approvals to ARCL to function as a Clearing Corporation with a limited purpose and to offer central counterparty services for repo transactions in debt securities.
It has been decided to put in place the following framework for upfront collection of amounts as charges from eligible issuers at the time of allotment of debt securities.
SEBI said the eligible issuers would be notified by the LPCC as per its risk management policy.
SEBI said that an amount of 0.5 basis points of the issuance value of debt securities per annum based on the maturity of debt securities will be collected by the stock exchanges and placed in an escrow account before the allotment of the debt securities.
The stock exchanges would transfer the amounts collected to the bank account of the LPCC within one working day of the receipt of the amount and inform the details of the same to the LPCC.
Details of the amounts so collected would also be disclosed by the stock exchanges on their website.
LPCC would provide an illustration of the calculation of the amounts to be contributed by the eligible issuers.
This circular shall come into force with effect from 01st May, 2023.
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