Online Bond Platform Provider

For most of its history the Indian corporate bond market has been a club of institutions. An Online Bond Platform Provider (OBPP) is one of SEBI's ways of opening the door.

The workbook gives two linked definitions:

• Online Bond Platform means any electronic system, other than a recognised stock exchange or an electronic book provider platform, on which debt securities which are listed or proposed to be listed are offered and transacted.
• Online Bond Platform Provider means any person operating or providing an online bond platform.

And it states the purpose plainly: OBPPs provide an avenue for investors, particularly non-institutional investors, to access the bond market.

In practice an OBPP is the app or website where an individual browses bonds and places an order. What happens behind the screen is tightly specified.

The regulatory framework. SEBI's circular of 14 November 2022, "Registration and regulatory framework for Online Bond Platform Providers", inter alia stipulated that all orders in listed debt securities placed on an online bond platform shall be mandatorily routed through the RFQ platform of the recognised stock exchange(s) and settled through the respective clearing corporations.

So the OBPP is the investor's front end, but the trade itself is executed on exchange RFQ infrastructure and settled by a clearing corporation.

What an OBPP is not. The definition excludes two things by name:

The reforms around it. In the same list of SEBI measures the workbook records the reduction in face value of privately placed listed debt securities and NCRPS from Rs 10 lakh to Rs 1 lakh (circular of 28 October 2022), and the RBI-authorised payment mechanisms permitted for RFQ settlement alongside RTGS (January 2023). The workbook presents these as separate measures; together they describe a market becoming reachable in smaller tickets.

Illustrative investor, bond and price, ignoring accrued interest.

Mrs Kulkarni, a salaried professional, has never bought a corporate bond. On an OBPP's app she finds a listed, AAA-rated non-convertible debenture with a face value of Rs 1,00,000 trading at Rs 1,01,200. She orders 5 bonds.

Consideration = 5 × Rs 1,01,200 = Rs 5,06,000

Behind the screen:

1. The OBPP routes her order to the RFQ platform of a recognised stock exchange — it cannot match the trade privately.
2. The trade executes there.
3. It is settled through the clearing corporation; the bonds reach her demat account and the funds leave hers.

Two changes made this possible at her ticket size. First, the platform itself: a route for non-institutional investors into a mainly institutional market. Second, the face value: under the pre-October 2022 denomination of Rs 10 lakh for such privately placed listed debt, even one bond would have cost roughly ten times her whole investment.

If the same app also let her subscribe to a new private placement through an EBP, that part would not be the OBPP activity — the definition excludes EBP platforms.

Chapter 1 (Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Markets) defines the OBPP at the end of section 1.14.2 on corporate bond markets, after listing SEBI's circular of 14 November 2022 requiring OBPP orders to be routed through the RFQ platform and settled through clearing corporations. Expect a definition question — what the platform excludes, and whom it is meant to serve — and a question on where OBPP orders must be routed.

• An online bond platform excludes recognised stock exchanges and EBP platforms by definition.
• Orders on an OBPP must be routed through the exchange RFQ platform and settled through clearing corporations — not matched on the OBPP's own books.
• It covers listed or proposed-to-be-listed debt securities, not unlisted bonds generally.
• The stated purpose is access for non-institutional investors.
• The regulatory framework circular is dated 14 November 2022.
• The OBPP is the provider; the online bond platform is the system. Two defined terms, one relationship.