Liquidity window vs put option: how they differ

Liquidity window vs put option is a comparison that trips people up, because one is made of the other. A liquidity window facility works by giving investors put options. What Chapter XXVI of SEBI's NCS Master Circular adds is everything around the option: a minimum size, a published calendar, a valuation-linked price and a per-ISIN disclosure file. This guide sets out where a plain put option ends and a liquidity window begins. It is not investment advice.

What is the relationship between a liquidity window and a put option?

A put option on a debt security is the holder's right to require early redemption. Regulation 15 of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 lets an issuer grant that right to all investors or only to retail investors, and the terms are whatever the offer document says.

Chapter XXVI of the Master Circular for issue and listing of non-convertible securities, securitised debt instruments, security receipts, municipal debt securities and commercial paper, dated 15 October 2025, does not invent a new right. The chapter states expressly that it introduces a liquidity window facility framework by use of put options as specified under Regulation 15, exercisable on pre-specified dates or intervals.

So the question is not which right the investor holds. It is how tightly the exercise of that right is specified in advance.

Where do they differ?

Each row is a place where the framework replaces an issuer's drafting choice with a standard.

Why does the minimum size matter?

Because a put option with no floor can be economically hollow.

Paragraph 6.4 requires the issuer to specify the percentage of issue size available for put option exercise over the tenor, and it cannot be less than 10%. The issuer may also set a per-window sub-limit, and where exercises exceed it, acceptance is proportionate rather than first come first served.

There is a second-order feature worth knowing. Under paragraph 6.9 the issuer can resell what it buys back, on the exchange debt segment, on the RFQ platform, through an online bond platform, or extinguish it. Anything resold is added back to the aggregate limit. So the 10% floor describes capacity at any point, not a lifetime ceiling.

Why does the pricing rule matter more than the schedule?

Because an option you can exercise on a known date at an unknown price is only half a protection.

With a plain put option, the exercise price is whatever the terms specify. The centralised bond database field set reflects exactly that: for each ISIN it records whether a put option is available and whether it can be exercised at discount, premium or par.

The liquidity window replaces that with a valuation. Securities are valued on T minus 1, where T is the first day of the window, and that valuation is displayed throughout the window on the issuer's and the exchanges' websites. The valuation follows the Valuation chapter of SEBI's master circular for mutual funds, cross-referenced as amended from time to time. The amount payable cannot be at a discount of more than 100 basis points on that valuation plus accrued interest. Funds reach the investor's linked bank account within one working day of the window closing, with settlement on T plus 4.

What does an investor have to check in each case?

For a plain put option, the offer document, plus the database fields recording availability, exercise basis and the redemption date due to the put option.

For a liquidity window, considerably more is published, and it is published per ISIN on the issuer's website: issuer name, outstanding amount, credit rating, coupon rate, maturity date, valuation where available, the window schedule, the percentage of issue size covered with the per-window sub-limit, the percentage already exercised with amounts paid, the extent sold or extinguished, the percentage still unused, and the extent replenished by issuer sales. The same set goes to the exchanges, the depositories and the debenture trustee, who host it on their websites or in the centralised corporate bond database, with changes intimated within 24 hours and reflected within one working day.

The unused percentage is the field that has no analogue for a plain put option. It tells a holder how much of the facility's capacity remains before proportionate scaling starts to bite.

Which one is an investor more likely to encounter?

Both are optional for the issuer, and neither is common. A liquidity window can only be attached to prospective issuances, at the time of issuance, on an ISIN basis, so it cannot be added to existing paper. It also cannot be used in the first year after issuance.

The practical takeaway is narrow. If an offer document mentions a put option, read the exercise basis and dates. If it mentions a liquidity window facility, the terms are largely standardised and the live state of the facility is a published, per-ISIN dataset. The full framework is in what is a liquidity window facility, and the instrument it attaches to is usually a plain NCD. Flock reports public regulatory filings with every claim sourced and dated. What any of it means for your money is your call to make.