Bonds to be settled under ‘dirty price’ mechanism: BSE

Mumbai, July 27: Corporate and government bondstradingundercleanpricemechanismwill be settled under the dirty price system, which takes into account both face value and accrued interest component of the bond, BSE has said.

The leading stock exchange has decided to move trading of some corporate and governmentbondsontotheCleanPriceandYieldmechanism in order to align with the debt Over the Counter (OTC) market. The changes will be effective August 8.

Currently, trading of all the bonds that are part of ‘F’ or ‘G’ group is done under the dirty price mechanism.

In the clean price system, the price of a bond is expressed in 100 basis points and excludes accrued interest, while yield of a bond is that rate which equates discounted value of future cash flows to the present price of the bond.

AccordingtoBSE,underthecleanpricemechanism, bonds will be made part of ‘FC’ and ‘GC’ groups for corporate and government bonds, respectively.

“... settlement of trades in bonds in the ‘FC’and'GC'groupwouldbeasperthedirtyprice mechanism," BSE said in a notice dated July 26.

PTI