The board of Securities and Exchange Board of India (SEBI) on Monday gave its nod to a new asset class and a liberalized framework for passive mutual fund schemes, while deferring changes to F&O norms and putting off the move towards instant settlement indefinitely.
The new asset class, to be called Investment Strategies, will be offered under the existing mutual fund framework, with a minimum ticket size of ₹10 lakh. Safeguards for the new product include no leverage, no investment in unlisted and unrated instruments beyond those already permitted for MFs and a derivatives exposure limited to 25 per cent of AUM for purposes other than hedging and rebalancing.
An “MF Lite framework” will be introduced for entities wanting to launch only passive MF schemes. AMCs having both active and passive schemes can hive off passive schemes to a different group entity, resulting in management of active and passive schemes by separate AMCs under a common sponsor.
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Also read: Bourses defer T+0 settlement pilot for institutional clients
Other norms
The light touch regulations include relaxed requirements relating to eligibility criteria for sponsors; including net worth, track record and profitability, responsibility of trustees, approval process and disclosures. The framework intends to promote ease of entry, encourage new players, reduce compliance requirements and enhance market liquidity, SEBI said in a release on Monday.
The number of scrips eligible for trading under optional T+0 settlement will be increased in a phased manner from 25 to top 500 in terms of market capitalisation. Stock brokers can offer access to the optional T+0 settlement cycle and charge differential fee for the same. Qualified Stock Brokers (QSBs) and custodians will put in place systems to enable seamless participation of clients in optional T+0 settlement cycle.
“The earlier proposal to move from optional T+0 settlement to optional instantaneous settlement is not under consideration for now,” the regulator said.
No mention of F&O
However the much-awaited norms on F&O did not find a mention in the SEBI press note. SEBI’s proposed set of seven changes to existing F&O norms, if implemented, was expected to reduce equity derivatives volumes by 30-40 per cent, impact exchange valuations and hit retail-focused brokers the most. The consultation paper had received over 10,000 responses, largely negative.
