Trading Activity In The Indian Government Bond Market
Author(s) Michael Fleming, Samita Sareen, Seema Saggar


We study how the Indian government bond market functions, how it has changed over time, and what factors help explain some of its features. In the primary market, we describe how underwriting obligations are allocated to primary dealers via auction and identify several significant determinants of the underwriting commission cutoff rate, including the launch of the NDS-OM electronic trading platform. In the secondary market, we explore the importance of benchmark bonds, the launch of NDS-OM, the growth in trading activity, and the migration of activity from the OTC market to NDS-OM. We find that benchmark bonds, larger issues, and recently issued bonds tend to trade more actively, but that that the launch of NDS-OM is associated with a reduced likelihood of a bond trading, but greater trading volume conditional on trading. Benchmark bonds, larger issues, and recently issued bonds are associated with a greater share of NDS-OM trading volume (as opposed to OTC trading volume), suggesting that the NDSOM platform is especially attractive for trading bonds with benchmark attributes.

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