Description

NSE Clearing Limited issues operational guidelines for clearing and settlement of debt securities transactions under the new Liquidity Window Facility, with bidding starting November 3, 2025.

Summary

NSE Clearing Limited (NCL) has issued operational guidelines for clearing and settlement of transactions under the new Liquidity Window Facility (LWF) for debt securities. This facility allows investors to exercise put options on debt securities through the stock exchange mechanism. NSE will offer the liquidity window for placing bids from November 3, 2025, with settlement handled by NCL. The facility is based on SEBI circular SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/141 dated October 16, 2024, and follows NSE’s operating guidelines issued via circular NSE/DS/70953 dated October 24, 2025.

Key Points

  • NSE Clearing Limited will handle settlement of transactions executed through the Liquidity Window Facility for debt securities
  • Liquidity window for placing bids will commence on November 3, 2025
  • Settlement calendar will be issued one working day prior to start of bidding
  • Investors can exercise put options through their stock brokers or Online Bond Platform Provider (OBPP) during normal trading hours
  • Early pay-in (EPI) through block mechanism is mandatory before placing bids
  • Stock exchanges will provide liquidity window from 9:00 AM to 5:00 PM, with additional 30 minutes on the last day for custodian confirmation
  • Cumulative quantity of debt securities for which put option has been exercised will be displayed online at specific intervals
  • Issuers can choose one or more stock exchanges and must declare a Designated Stock Exchange (DSE)
  • Issuers must appoint a Registrar and Transfer Agent (RTA) for allocation and a clearing member for settlement

Regulatory Changes

This circular implements SEBI’s directive to introduce a Liquidity Window Facility for investors in debt securities through stock exchange mechanism. The facility provides a structured process for exercising put options on debt securities, replacing or supplementing previous redemption mechanisms. Key regulatory changes include:

  • Mandatory early pay-in through depository block mechanism before bid placement
  • Restriction of SEBI-debarred investors from participating
  • Depositories must provide investor information to Clearing Corporations including PAN, beneficiary account details, and bank details with IFSC code
  • Provision for multiple ISINs to be handled simultaneously in the depository system

Compliance Requirements

For Members and Participants:

  • Review and implement operational guidelines for settlement of debt securities under liquidity window
  • Ensure systems are ready for settlement starting November 3, 2025
  • Monitor settlement calendar to be issued one working day before bidding starts

For Issuers:

  • Select one or more stock exchanges for liquidity window facility
  • Declare a Designated Stock Exchange (DSE) if using multiple exchanges
  • Appoint a Registrar and Transfer Agent (RTA) for allocation purposes
  • Appoint a clearing member for settlement purposes

For Investors:

  • Complete mandatory early pay-in (EPI) through block mechanism in depository system before placing bids
  • Exercise put options through registered stock broker or OBPP during trading hours (9:00 AM to 5:00 PM)
  • Ensure beneficiary account details and bank details including IFSC code are accurate in depository records

For Depositories:

  • Provide information to Clearing Corporations about early pay-in
  • Share investor PAN, beneficiary account details, and bank details including IFSC code
  • Enable facility for early pay-in for multiple ISINs simultaneously

Important Dates

  • October 16, 2024: SEBI issued circular on Liquidity Window Facility (reference SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2024/141)
  • October 24, 2025: NSE issued operating guidelines (circular NSE/DS/70953)
  • October 27, 2025: NCL issued clearing and settlement guidelines (circular 0340/2025)
  • November 3, 2025: Commencement of liquidity window for placing bids
  • One working day before November 3, 2025: Settlement calendar to be issued by NCL

Impact Assessment

Market Impact: The introduction of the Liquidity Window Facility represents a significant structural change in the debt securities market, providing investors with a standardized exchange-based mechanism to exercise put options. This enhances liquidity and transparency in the debt market by making redemption data publicly visible throughout the trading session.

Operational Impact: All market participants including clearing members, brokers, issuers, depositories, and RTAs will need to adapt their systems and processes to comply with the new framework. The mandatory early pay-in requirement through block mechanism necessitates integration between trading and depository systems. The facility for handling multiple ISINs simultaneously adds complexity to depository operations.

Investor Impact: Investors gain improved access to liquidity through a transparent, exchange-based mechanism for exercising put options. The mandatory blocking of securities before bidding provides certainty of settlement but requires advance planning. Extended trading hours (9:00 AM to 5:00 PM with additional 30 minutes on last day) provide flexibility for participation.

Issuer Impact: Issuers must establish relationships with RTAs and clearing members, and make decisions about which stock exchanges to use for their liquidity windows. The real-time visibility of cumulative redemption requests helps issuers manage their liquidity planning more effectively.

Impact Justification

Introduces new operational framework for debt securities liquidity window affecting all debt market participants, clearing members, and investors with specific mandatory processes and timelines