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Why does Zerodha’s Nithin Kamath like bonds? Here’s what his new post suggests


Billionaire stockbroker and Zerodha CEO Nithin Kamath on Tuesday said capital markets regulator Sebi has released guidelines to make investing in bonds easier for retail investors. .

“We have always believed that bonds, but possibly not stocks, are the right stepping stone for most Indians—better than FD returns but less risky than stocks’,” said Zerodha’s boss.

In a series of tweets, Kamath said, “Bonds are an HNI product and no one is selling them for retail. But SEBI has made some important changes recently.”

Explaining further, he said: “There are two big problems:

1. Availability of small denomination bonds. Most bonds are issued through private placement and have face value $10 thousand +. So retail investors have been valued

2. All bond transactions must be settled through clearing corporations and they only accept RTGS as a payment method. So the minimum trade size has become $2 lakh+ by default.”

Over the past few months, according to Kamath, Sebi has made a number of important changes to make it easier for retail investors to invest in corporate bonds.

1. The par value of bonds issued by private placement is reduced to $1 thousand.

2. Brokers are now allowed to participate in the Request for Quotations (RFQ) Platform on behalf of investors

3. The most important change from yesterday is to allow alternative payment modes other than RTGS.

Now, bonds worth less than ten thousand can also be settled through clearing conglomerates, Kamath said.

“These measures will go a long way toward making it easier for retail investors to invest in corporate bonds. As retail demand picks up, expect to see more bonds issued in smaller denominations,” he wrote on Twitter.

Earlier on Monday, Sebi said payment mechanisms offered by banks and payment aggregators could be used to settle debt securities transactions conducted on the request for quote platform. (RFQ) of stock exchanges.

This complements the existing payment mechanism of Real-Time Gross Settlement (RTGS) offered by banks, the Securities and Exchange Commission of India stated in a circular.

In fact, currently, stock exchanges are using the RTGS channel as a payment method for transactions conducted on the RFQ platform for listed corporate bonds, commercial paper and debt instruments. securitized.

“What is clear is that in addition to existing payment mechanisms, payment mechanisms provided by banks/payment aggregators authorized by the Reserve Bank of India may, from time to time, be used to pay for transactions made on the RFQ platform,” Sebi said in a statement.


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