In a major boost to the corporate bond market, the Securities and Exchange Board of India (Sebi) has directed that all trading in corporate bonds should be cleared and settled only through the National Securities Clearing Corp (NSCCL) or the Indian Clearing Corp (ICCL). This means that entities trading in bonds won’t have to bother about the counter party not paying up.

“The provisions of this circular shall be applicable to all corporate bonds traded Over The Counter (OTC) or on the debt segment of stock exchanges on or after December 1, 2009,” Sebi said in a statement. However, the provisions of this circular will not be applicable to trades in corporate bonds that are traded on the capital market segment or equity segment of the stock exchanges and are required to be settled through clearing corporations or clearing houses of stock exchanges, Sebi said. The Reserve Bank of India has talked about allowing repos in corporate bonds for more than a decade, but the absence of a clearing and settlement system for corporate bonds has hampered implementation of the proposal.