RBI cuts trading limit in pre-primary bond market

MUMBAI: The Reserve Bank of India has cut the trading limit for institutions in When Issued market, a platform for price discovery before a new government bond come up for sale or is reissued.

For taking short positions, banks or bond houses are mandated not to exceed 5 per cent of notified amount versus 10 per cent earlier. The move is seen as a shield against any systemic risk that may arise from such trading as more institutions like commercial banks are now allowed to trade in the WI market.

"As more and more institutions are trading here, such a restriction will prevent the system from any distortion in actual pricing and security deliveries at the time of real issuance," said a bond dealer.

"The open position limits in the WI market have been revised… both in case of new securities as well as reissued securities, RBI said in a notification on Thursday.