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The Securities and Exchange Board of India on Tuesday put on hold the proposed extension of trading hours for equity markets.
The market regulator also announced changes to the total expense ratio (TER) structure of the domestic mutual fund (MF) industry, which it said would lead to annual savings of ₹1,300-1,500 crore for investors. SEBI lowered the expenses paid by investors of equity mutual fund schemes by linking them to assets under management (AUM). These decisions were announced after SEBI’s board meeting in Mumbai.
Both the BSE and the National Stock Exchange had announced extension of trading hours for equity derivatives till 11:55 pm after SEBI in May allowed a time limit for trading equities up to midnight. But on Tuesday, Ajay Tyagi, SEBI Chairman, said that exchanges were yet to put up a complete proposal before SEBI, including risk mitigation and other such measures, and hence the announcement to extend the timing from October was deferred.
Yet, there is widespread speculation that SEBI’s move was mainly prompted by brokers’ opposition to the extension of trading hours until midnight.
Brokers say that the costs owing to extension of trading hours may outweigh the benefits. Exchanges claim that brokers are limiting domestic investors’ market access at a time of day when foreign players can take positions overseas.
Madhabi Puri Buch, whole-time member, SEBI, said “Assets under management of the industry are at a record of ₹25 lakh crore, resulting in a revenue of ₹ 13,000 crore. Cutting down the expense ratio is one of the few measures that SEBI had planned to bring down the cost for MF investors. Other measures too will follow.”
According to SEBI, the TER for closed-end equity-oriented schemes will be a maximum of 1.25 per cent and for other closed-end schemes will be a maximum of 1 per cent. For index funds and exchange-traded funds, it will be up to 1 per cent. For Fund of Funds, it will be a maximum of twice the TER of the underlying funds. For Fund of Funds investing in liquid, index and ETF schemes, the maximum total TER will be 1 per cent. For Fund of Funds investing in active underlying schemes, the maximum total TER will be 2.25 per cent for equity-oriented schemes and 2 per cent for other schemes.
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