The Government of India and RBI, recognizing the need for retail participation had in early 2000 announced a scheme for enabling retail participation through a non-competitive bidding facility in the G-Sec auctions with a reservation of 5% of the issue amount for non-competitive bids by retail investors.
The Retail Trading in G-Secs Commenced on January 16, 2003 in accordance with the SEBI Circular bearing ref. no. SMD/Policy/GSEC/776/2003 dated January 10, 2003. The Indian Fixed Income Markets, which until some time ago was the mainstay of the wholesale investors, were made accessible to the retail investors, thanks to some path-breaking initiatives by the Government of India - Ministry of Finance, RBI and SEBI to enable retail trading in G-Secs through stock exchanges. BSE has, for long, been an ardent advocate of the need to enable the participation of the 28 million Indian investor multitudes in the Indian Fixed Income Markets. The Indian Investor is today able to buy or sell G-Secs through more than 800 active BSE members spread across 44 cities around the country.
The Retail Debt Market Module of BSE aims at providing an efficient and reliable trading system for Gsec. The key features of the system are:
- Trading: by electronic order matching based on price-time priority through the BOLT (BSE OnLine Trading) System with the continuous trading sessions from 9.15 a.m. to 3.30 p.m as is operational in the Equities Segment. Retail Trading in G-secs is on a Rolling Settlements basis with a T+2 Delivery Cycle.
- Clearing and Settlement: The Clearing and Settlement mechanism for the Retail trading in G-Secs is based on the existing institutional mechanism available at BSE. The trades executed throughout the continuous trading sessions are netted out at the end of the trading hours through a process of multilateral netting. The transactions are netted out member-wise and then security-wise so as to determine the net settlement and payment obligations of the members.
The Delivery obligations and the payment orders in respect of these members are generated by the Clearing and Settlement system of BSE. These statements indicate the pay-in and pay-out positions of the Members for securities and funds who then give the necessary instructions to their Clearing Banks and depositories.
The entire risk management and the clearing and settlement activities for the trades executed in the Retail Debt Market System are undertaken by BSE Exchange Clearing House.
- Holding and Transfer of G-Secs: The G-secs for retail trading through BSE can be held by investors in the same Demat account as is used for equity at the Depositories. NSDL and CDSL hold the combined quantity of G-Secs in their SGL-II A/cs of RBI, meant only for client holdings.