SEBI: SEBI continues to deepen liquidity in passive funds

MUMBAI: The Securities and Exchange Board of India (SEBI), the market regulator, has come up with a number of measures to improve liquidity in passive funds and make it more transparent for retailers to increase their participation and make it easier for them to buy these products.

Currently, many exchange-traded funds (ETFs) are liquid, with high spreads preventing investors from buying them. To address this, SEBI has said that each fund house will hire at least two market makers to provide uninterrupted liquidity on the stock exchange platform.

In addition, direct transactions with investors for over ₹ 25 crore with the fund house will be facilitated. “This will push up a lot of transactions on the exchange, which will increase demand and supply and is structurally good for liquidity,” said Niranjan Awasthi, head-product.

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SEBI further specified that iNAV (Indicative Net Asset Value) must be disclosed regularly – 15 seconds lag for equity ETFs and at least four times a day for debt ETFs.

Mutual fund investors seeking tax savings will now have the opportunity to invest in a passive fund, allowing regulatory fund houses to introduce such a passive equity-linked savings scheme or ELSS. However, a fund house can choose only one of active or passive ELSS.

In the case of Sebio Passive Fund, the ratio of expenditure in the Investor Awareness Program (IAP) has been reduced from 2 basis points to 1 basis point, reducing costs.

The regulator has also laid down guidelines on how to manage debt default funds so that it replicates a varied underlying index.

Where the index has 80% exposure to corporate debt securities, the single issuer limit for AAA-rated securities is set at 15%, for AA-rated securities, 12.5% ​​and the weight of A-rated securities will not exceed 10%. An indicator. For an index based on G-Sec and state government bonds, a single issuer limit will not apply.

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