Media Release
BSE introduces Clean Price/yield based trading in corporate bond and government bond
Mumbai: July 25, 2016: BSE, Asia’s oldest exchange and now world’s fastest exchange with order response time of 6 microseconds is introducing “Clean Price” based trading mechanism from Monday, August 08, 2016 on select group of Corporate bonds and Government bonds. This is with a view to provide pricing transparency in trading in Corporate Bonds and Government Bonds. The number of bonds, to be traded on clean-price based mechanism, will be increased phase-wise. Currently, trading in Corporate Bonds and Government Bonds happens on “Dirty Price” on Exchange’s debt trading platform under capital market segment. This move will align Exchange’s debt trading with OTC markets and NDS-OM.
Currently, trading happens on dirty price. As dirty price has accrued interest embedded in it, the investor is not able to see the actual price of the bond and has to calculate yield and clean price separately.
In Debt OTC market, bonds are traded on Clean Price and Yield. Clean price of a bond is the price of a bond expressed in 100 basis points and excludes accrued interest. Yield of a Bond (YTM) is that rate which equates the discounted value of the future cash flows to the present price of the bond.
The new mechanism will provide ease of business and will align with the best practices of the debt market. Additionally, real-time information of yield to maturity (YTM) and current yield on last traded price will provide more analytics to the bond traders and retail customers.
The following are key features of Clean price/Yield based trading:
· A trader can place order in a Bond based on clean price or yield. When a trader places an order in a bond security, the Exchange will compute yield (if the user enters clean price) or clean price (if the user enters yield).
· Orders will be matched on the clean price.
· The Exchange will also compute and provide other key information in its market data at every order and trade level, viz. Accrued Interest, Dirty Price and Total Consideration.
· Along with YTM, the Exchange will provide YTP and YTC for best buy and sell order which have a Call / Put Option. Also, Exchange will provide Current Yield information on last traded price.
· The Exchange will also provide upto 50 key details of a bond viz. issue date, maturity date, interest payment dates, record dates and ratings.
· This information shall be made available on trading screens as well on Bseindia website for participants.
Media Query
Yatin Padia
022 2272 8516
Yatin.padia@bseindia.com