Why are corporate bonds still traded OTC and not electronically?
Dear Mr.Marcos Jaramillo
A number of value investors, including myself, are keen to make bond investments in India, and always wonder whether one can invest in corporate bonds be made in India through an online trading account. In the US and other financially mature countries buying bonds online is easy and widespread. However, Indian bond market is still in a very nascent and under developed stage. There is a lot of discussion in the official and media circles about the need for the development of bond markets but progress on the ground is negligible.
It appears that online bond trading does take place in a limited way. I too have explored the possibility a few times but did not find any attractive capital appreciation opportunities, and therefore did not pursue the matter any further.
Since I do not have any direct personal experience of buying bonds electronically, I cannot say for sure whether the possibility exists, but a cursory glance at the following web pages does indicate it is possible:
- I had seen corporate bonds being listed on the websites. Please see this link of bonds listed on BSE/ NSE. If bonds are listed on the stock exchange, I presume they are available for online trading. Here is the link: http://www.moneycontrol.com/fixed-income/bonds/listed-bonds/.
- NSE lists bonds traded on the exchange as well as OTC Trades in two different pages, indicating that indeed it is possible to electronically trade bonds on the stock exchange. Here is the link: https://www.nseindia.com/products/content/debt/corp_bonds/cbm_reporting_homepage.htm.
- My online trading account with Kotak Securities shows a menu option for bonds investment. Please see the screenshot below:
- Bond Definition
- What is the Relationship Between a Bond's Market Price and Its Yield to Maturity?
- What is the Better Investment Instrument Between Stock and Bond?
- How To Invest In Stocks And Bonds For Beginners - Video
- Is there a Legal Cap on Bond Rates?
- What is the Difference Between Bond and Share?
Markets in India for corporate bonds lack both the breadth and depth, and are still in the nascent stage of development, providing little opportunity for meaningful bonds investment. Even though I have not personally made bonds investment, more because of a lack of an attractive investment in corporate bonds, it appears that it is feasible for buying bonds electronically through the online trading account.
With Best Regards