Comments
In order to enhance liquidity in units of ETFs on the stock exchange platform, SEBI has decided that direct transaction with AMCs will be allowed for ₹25 crore and above.
However, the threshold will not be applicable for market makers and will be reviewed periodically, said SEBI in a circular on Monday.
Direct redemption
Investors can also directly approach the AMC for redemption of units of ETFs above ₹25 crore without any exit load, if the closing price of the ETF units is at discount of over one per cent to the day-end NAV for seven continuous trading days or no quotes for the ETFs are available on stock exchange for three consecutive trading days.
AMCs have to redeem the units if total bid size on the exchange is less than half of creation units size daily, averaged for seven consecutive trading days, it added. The provision of the circular will come into effect from July 1, it said.
SEBI also allowed mutual funds to launch equity-linked savings schemes (ELSS) as passively-managed funds based on an index that comprises top 250 companies in terms of market capitalisation. However, a fund house can either have an active or a passive ELSS, but not both. Most of the new-age fund houses may opt for passively-managed ELSS fund.
Gets thumbs up
Radhika Gupta, Managing Director and Chief Executive Officer, ·Edelweiss Asset Management Ltd, in a tweet, said, “The new circular by SEBI on passive funds has some fantastic changes that will drive further transparency, liquidity and innovation. In particular, the regulations on debt passives are a big positive for this fast growing category.”
SEBI also laid down guidelines on how debt passive fund ETFs and index funds should be managed to ensure that they reflect the underlying index.
The minimum subscription during New Fund Offer for Debt and other ETFs/Index funds will be ₹10 crore and ₹5 crore, respectively.
Market makers
The AMC can also contribute the initial fund for unit creation and subsequently transfer it to market makers or other investors, it said.
All direct transactions in units of ETFs by market makers with AMCs shall be at intra-day NAV based on the actual execution price of the underlying portfolio; swing pricing will not be applicable to Debt ETFs.
Indicative NAV of an ETF based on the current market value of its portfolio during the trading hours has to be disclosed on a continuous basis on the stock exchanges, said SEBI.
The portfolio of debt ETFs and Index funds should be re-balanced within seven calendar days on change in index constituents. In case, the rating of any security is downgraded to below the rating criteria of the index, the portfolio should be re-balanced within 30 days, it said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.