Description
The money markets are used for the raising of short term finance, sometimes for loans that are expected to be paid back as early as overnight. Whereas the capital markets are used for the raising of long term finance, such as the purchase of shares, or for loans that are not expected to be fully paid back for at least a year.
Terms of Reference
(Project Name: Capital Market Development, Debt Management and Pension Reform Technical Assistance Project [Project ID: P113834] Assignment Description: Corporate Bond Market Development - Technical study on investment regulations of institutional investors Type of Contract: Lumpsum Method of Selection: Consultant Qualifications or Fixed Budget Assignment Duration: 4-6 Months Background Indian capital markets have witnessed a radical transformation over just a decade. From the view point of both adoption of sophisticated information technology tools in trading and settlement mechanisms as also the efficiency of capital markets, India ranks in the top league. With reference to risk management Indian capital markets have proved to be robust. While these are important achievements, there is need to move further ahead. India’s needs of a sophisticated financial system have never been greater. A fast growing trillion dollar GDP with a high savings rate urgently needs a state of art financial system that will maximize the quality of investment that takes place. At present, the equity market still has some deficiencies. Further, there are strong deficiencies in the currency, fixed income, credit risk, and commodity markets. All these markets need to function at a high level of quality in order to serve India’s needs. The best path for achieving progress is to press the ideas and the institutional capabilities of the equity market into service in these areas. In this context, the World Bank received a request from the Capital Market Division of the Ministry of Finance for a technical assistance project to support development and implementation in three broad areas under its purview namely, capital market development, debt management and pension reforms. The World Bank TA loan Project is aimed at contributing to the process through appropriate handholding (by the World Bank) by leveraging on their vast and varied international experience in this regard. In order to facilitate early initiation of the TA program, it has been decided to operationalize the loan through Project Preparation Finance (PPF) route. The project preparation advance will be utilized to meet the cost of preparation of terms of reference, setting up project monitoring unit, securing services of nationally/ internationally experienced consultants to manage and coordinate commencement of the project. The following are the components of the Project which are applicable to SEBI/ NISM. 1. Regulatory Impact Assessment 2. Corporate Bond Market Development 3. Assistance to National Institute of Securities Market in the areas of certification, securities market simulator for training and faculty training program
1
Objectives of the Assignment The main objective of the assignment is to examine/ evaluate impact of reforms carried out in the corporate bond markets, examine international experience in this area with a view to offer specific guidance on further reforms, prepare a road map for way forward and evaluate existing investment regulations prescribed for various classes of investors (institutional) and their investment behaviour in various fixed income products with a view to ascertain the impact on the development of the corporate bond markets. In addition, the assignment should also examine/ evaluate developments in the market for securitized debt instruments and come up with recommendations regarding measures to develop this market. Scope of work and description of the tasks: • Review and summarize the status of the recommendations made for development of corporate bond / securitized debt markets in the past by various Committees (Patil, Deepak Parekh, Rajan etc.) Asses the impact of reforms already undertaken, independently and by way of feedback from issuers, intermediaries and investors through discussions. Identify clearly the areas where implementation has been lacking along with reasons for the same. The reasons shall be classified regulator/authority wise and the impact of such lacunae on the lack of development in the market be discussed. Study international experience with a view to give specific guidance in our context on development of market for repos / securities lending and borrowing in corporate bonds, development of alternate trading platforms for trading of corporate bonds, clearing and settlement practices related to corporate bonds/ securitized debt instruments and development of market in securitized debt instruments. Prepare a roadmap for further steps / measures which are needed to be taken for development of the corporate bond and securitized debt markets, identifying the agencies responsible for implementation for each of the proposals. Study present investment regulations for institutional investors such as insurance companies, pension/provident funds, foreign institutional investors, Financial Institutions/Public Financial Institutions, non-bank finance companies, mutual funds, banks and other educational trusts/charities etc. Examine the regulatory requirements and procedures for investment decisions in fixed income products including for investments in infrastructure/housing financing, structured products and derivatives, with a view to identify limitations on the size/diversification of the portfolio, types of instruments including restrictions based on ratings, sectoral limits etc, and usage of intermediaries such as brokers for secondary trading. Study impact of tax treatment, including stamp duties on issuance of corporate bonds. This section could include a description and analysis of the valuation framework developed by CRISIL and whether there are any constraints generated by the CRIISL framework. Based on the information collected on the different types of institutional investors and investment regulations, the study will include an estimation the asset holdings in bonds of these different types on institutional investors. The study should also make recommendations on how to improve data collection for investments by different institutional investors by asset class.
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List of reports, schedule of deliveries, period of performance
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The study report as per the scope & objective as outlined above may be prepared within a period not exceeding seven months. The period may be extended by mutual agreement, if required. The consultant will present an inception report within one month of beginning the assignment to discuss the methodology and agree on the key objectives and outputs. The submission of the final report will be preceded by a brainstorming seminar with key stakeholders to share the key recommendations and elicit feedback. It is expected that the tasks described would be completed before the expiration of the PPF period. If the PPF period is extended, the time period for completing the project may be extended on mutual agreement of the consultant and the Borrower. Data, services and facilities to be provided by the client: If required, the Consultant will be provided infrastructure in SEBI for working on the project. Eligibility Criteria of Consultant/ Consulting Firm • • Demonstrated experience of undertaking consulting assignment similar to this project. Sound and in-depth knowledge of capital markets legal and regulatory framework and market practices in India as well as internationally, specifically for institutional investors. Prior experience of engaging constructively with MoF, financial sector regulators, and securities market participants would be an advantage.
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Institutional, Organization Arrangements and Reporting The administration of the project to be overseen by Project Management and Implementation Group (PMIG) headed by Joint Secretary (Capital Market). This group will report to the Advisory Group headed by Additional Secretary (Economic Affairs). PMIG will process application for each activity on the basis of the guidelines set by Advisory Group and the plans submitted by respective Working Groups. The consultant will be based at Head quarters of SEBI who will be providing with necessary infrastructure. NISM, SEBI Divisions dealing with Corporate Bonds and Policy Research could be key interlocutors for this study. The consultant will be interacting with various other agencies as per the scope of the project. The Consultant will report to the Advisory Group and Project Management & Implementation Group through WTM (MSS) who is SEBI nominee to the Advisory Group. The consultant’s report will be submitted to above authorities after its evaluation by the internal SEBI working group. The Advisory Group will be meeting periodically
3
during the PPF period to monitor the progress of the project as per the broad principles to be laid down by the Group. List of key professional positions whose CV and experience would be evaluated: S. No. Key Position Senior Level Area of Specific Expertise desired Fixed Income Instruments: Policy, Risk Management, Research, Treasury, Consultancy. Minimum Qualification and Professional Experience Desired • • CA/ MBA (Finance)/ ICWA/ CS/ M (Com.)/ M.A (Economics) 10 years of relevant experience
Consultants with higher level of Qualifications and Experience will be preferred.
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doc_158113680.pdf
The money markets are used for the raising of short term finance, sometimes for loans that are expected to be paid back as early as overnight. Whereas the capital markets are used for the raising of long term finance, such as the purchase of shares, or for loans that are not expected to be fully paid back for at least a year.
Terms of Reference
(Project Name: Capital Market Development, Debt Management and Pension Reform Technical Assistance Project [Project ID: P113834] Assignment Description: Corporate Bond Market Development - Technical study on investment regulations of institutional investors Type of Contract: Lumpsum Method of Selection: Consultant Qualifications or Fixed Budget Assignment Duration: 4-6 Months Background Indian capital markets have witnessed a radical transformation over just a decade. From the view point of both adoption of sophisticated information technology tools in trading and settlement mechanisms as also the efficiency of capital markets, India ranks in the top league. With reference to risk management Indian capital markets have proved to be robust. While these are important achievements, there is need to move further ahead. India’s needs of a sophisticated financial system have never been greater. A fast growing trillion dollar GDP with a high savings rate urgently needs a state of art financial system that will maximize the quality of investment that takes place. At present, the equity market still has some deficiencies. Further, there are strong deficiencies in the currency, fixed income, credit risk, and commodity markets. All these markets need to function at a high level of quality in order to serve India’s needs. The best path for achieving progress is to press the ideas and the institutional capabilities of the equity market into service in these areas. In this context, the World Bank received a request from the Capital Market Division of the Ministry of Finance for a technical assistance project to support development and implementation in three broad areas under its purview namely, capital market development, debt management and pension reforms. The World Bank TA loan Project is aimed at contributing to the process through appropriate handholding (by the World Bank) by leveraging on their vast and varied international experience in this regard. In order to facilitate early initiation of the TA program, it has been decided to operationalize the loan through Project Preparation Finance (PPF) route. The project preparation advance will be utilized to meet the cost of preparation of terms of reference, setting up project monitoring unit, securing services of nationally/ internationally experienced consultants to manage and coordinate commencement of the project. The following are the components of the Project which are applicable to SEBI/ NISM. 1. Regulatory Impact Assessment 2. Corporate Bond Market Development 3. Assistance to National Institute of Securities Market in the areas of certification, securities market simulator for training and faculty training program
1
Objectives of the Assignment The main objective of the assignment is to examine/ evaluate impact of reforms carried out in the corporate bond markets, examine international experience in this area with a view to offer specific guidance on further reforms, prepare a road map for way forward and evaluate existing investment regulations prescribed for various classes of investors (institutional) and their investment behaviour in various fixed income products with a view to ascertain the impact on the development of the corporate bond markets. In addition, the assignment should also examine/ evaluate developments in the market for securitized debt instruments and come up with recommendations regarding measures to develop this market. Scope of work and description of the tasks: • Review and summarize the status of the recommendations made for development of corporate bond / securitized debt markets in the past by various Committees (Patil, Deepak Parekh, Rajan etc.) Asses the impact of reforms already undertaken, independently and by way of feedback from issuers, intermediaries and investors through discussions. Identify clearly the areas where implementation has been lacking along with reasons for the same. The reasons shall be classified regulator/authority wise and the impact of such lacunae on the lack of development in the market be discussed. Study international experience with a view to give specific guidance in our context on development of market for repos / securities lending and borrowing in corporate bonds, development of alternate trading platforms for trading of corporate bonds, clearing and settlement practices related to corporate bonds/ securitized debt instruments and development of market in securitized debt instruments. Prepare a roadmap for further steps / measures which are needed to be taken for development of the corporate bond and securitized debt markets, identifying the agencies responsible for implementation for each of the proposals. Study present investment regulations for institutional investors such as insurance companies, pension/provident funds, foreign institutional investors, Financial Institutions/Public Financial Institutions, non-bank finance companies, mutual funds, banks and other educational trusts/charities etc. Examine the regulatory requirements and procedures for investment decisions in fixed income products including for investments in infrastructure/housing financing, structured products and derivatives, with a view to identify limitations on the size/diversification of the portfolio, types of instruments including restrictions based on ratings, sectoral limits etc, and usage of intermediaries such as brokers for secondary trading. Study impact of tax treatment, including stamp duties on issuance of corporate bonds. This section could include a description and analysis of the valuation framework developed by CRISIL and whether there are any constraints generated by the CRIISL framework. Based on the information collected on the different types of institutional investors and investment regulations, the study will include an estimation the asset holdings in bonds of these different types on institutional investors. The study should also make recommendations on how to improve data collection for investments by different institutional investors by asset class.
• •
•
•
•
•
•
•
List of reports, schedule of deliveries, period of performance
2
The study report as per the scope & objective as outlined above may be prepared within a period not exceeding seven months. The period may be extended by mutual agreement, if required. The consultant will present an inception report within one month of beginning the assignment to discuss the methodology and agree on the key objectives and outputs. The submission of the final report will be preceded by a brainstorming seminar with key stakeholders to share the key recommendations and elicit feedback. It is expected that the tasks described would be completed before the expiration of the PPF period. If the PPF period is extended, the time period for completing the project may be extended on mutual agreement of the consultant and the Borrower. Data, services and facilities to be provided by the client: If required, the Consultant will be provided infrastructure in SEBI for working on the project. Eligibility Criteria of Consultant/ Consulting Firm • • Demonstrated experience of undertaking consulting assignment similar to this project. Sound and in-depth knowledge of capital markets legal and regulatory framework and market practices in India as well as internationally, specifically for institutional investors. Prior experience of engaging constructively with MoF, financial sector regulators, and securities market participants would be an advantage.
•
Institutional, Organization Arrangements and Reporting The administration of the project to be overseen by Project Management and Implementation Group (PMIG) headed by Joint Secretary (Capital Market). This group will report to the Advisory Group headed by Additional Secretary (Economic Affairs). PMIG will process application for each activity on the basis of the guidelines set by Advisory Group and the plans submitted by respective Working Groups. The consultant will be based at Head quarters of SEBI who will be providing with necessary infrastructure. NISM, SEBI Divisions dealing with Corporate Bonds and Policy Research could be key interlocutors for this study. The consultant will be interacting with various other agencies as per the scope of the project. The Consultant will report to the Advisory Group and Project Management & Implementation Group through WTM (MSS) who is SEBI nominee to the Advisory Group. The consultant’s report will be submitted to above authorities after its evaluation by the internal SEBI working group. The Advisory Group will be meeting periodically
3
during the PPF period to monitor the progress of the project as per the broad principles to be laid down by the Group. List of key professional positions whose CV and experience would be evaluated: S. No. Key Position Senior Level Area of Specific Expertise desired Fixed Income Instruments: Policy, Risk Management, Research, Treasury, Consultancy. Minimum Qualification and Professional Experience Desired • • CA/ MBA (Finance)/ ICWA/ CS/ M (Com.)/ M.A (Economics) 10 years of relevant experience
Consultants with higher level of Qualifications and Experience will be preferred.
************************************
4
doc_158113680.pdf