accordingly displays kinks, reflecting the liquidity premium commanded by select securities / tenors. to a certain extent, this is the result of the market microstructure in india, dominated as it is by ‘ buy and hold ’ and ‘ long only ’ investors. we need to develop a yield curve that is liquid across tenors. 26. second, expansion of the investor base is key to further development of the market. the rbi, together with the government, is making efforts to enable international settlement of transactions in g - secs through international central securities depositories ( icsds ). once operationalized, 4 / 5 bis central bankers'speeches this will enhance access of non - residents to the g - secs market, as will the inclusion of indian gsecs in global bond indices, for which efforts are ongoing. to encourage direct retail participation in g - secs, rbi has announced the ‘ retail direct ’ scheme, a one - stop solution to facilitate investment in government securities by individual investors. 27. third, liquidity in g - secs market tends to dry up during periods of rising interest rates or in times of uncertainty. while the market for ‘ special repo ’ facilitates borrowing of securities, it is worthwhile to consider other alternatives that ensure adequate supply of securities to the market across the spectrum of maturities. it may be recalled that discussions were held on the introduction of securities lending and borrowing mechanism ( slbm ) with a view to augment secondary market liquidity, by incentivizing ‘ buy and hold ’ type of investors ( e. g., insurance companies, pension funds ) to make available their securities to other market participants. useful feedback was received on the subject from the fimmda and the pdai. i would urge that these discussions be carried forward with a view to evolving market - based mechanisms that enable the lending and borrowing of securities as part of overall market development. 28. fourth, the interest rate derivatives ( ird ) market has developed over the years with the availability of a wide range of products. the only major liquid product, however, continues to be the mumbai interbank offer rate ( mibor ) based overnight indexed swaps ( ois ) market. participation in the ird markets is also largely limited to foreign banks, private sector banks and primary dealers. i am happy to note that based on rbi directions, fimmda formulated the operational guidelines for trade in swaptions in consultation with market participants and trading in swap

/ facilitators for retail investors ; introduction of products for retail 2 / 5 bis central bankers'speeches investors, etc. interoperability is sought to be enhanced by linking market infrastructure – linking exchange trading systems and nds - om ; and linking rbi ’ s subsidiary general ledger system and the depositories. 13. foreign investors have been permitted to invest in g - secs, subject to prudential limits. recent initiatives like the introduction of the voluntary retention route ( vrr ) and fully accessible route ( far ) have contributed to demand side resilience. non - resident participation in interest rate derivatives markets for hedging as well trading has been permitted. the regulatory framework for hedging of foreign exchange risk has been liberalized to incentivize investors to hedge their currency risk onshore. several other measures to promote ‘ ease of doing business ’ by foreign investors viz., t + 2 settlement of trades, extended timing for reporting of transactions and allowing banks to fund margins for g - sec trades, have also been taken. market infrastructure – state - of - the - art trade and post - trade services 14. a sound, robust and safe market infrastructure increases the resilience of the g - sec market against external shocks and contributes to price discovery. the reserve bank has continuously engaged in developing state - of - the - art infrastructure relating to trading and post - trade services, including settlement, reporting and timely dissemination of traded information, both in outright and repo markets. i can say with all humility that the infrastructure of the g - sec market in india can be regarded as cutting edge in terms of sophistication. the nds - om system of the reserve bank – an anonymous order matching platform – provides multiple functionalities, which include trading in standard and odd lot sizes and trading in the “ when - issued ” market. this is in sharp contrast to most jurisdictions – including advanced economies, where trading in government bonds is predominantly voice - negotiated or fragmented over multiple electronic trading platforms ( etps ). the nds - om is perhaps unique as it ( i ) provides unparalleled pre - and post - trade transparency ; ( ii ) pools all market liquidity, providing a single order book ; and ( iii ) facilitates anonymity in trading, thus ensuring fair and non - discriminatory price discovery even for small investors. 15. complementing the trading infrastructure is a delivery - versus - payment - based guaranteed settlement mechanism which eliminates