The National Stock Exchange on Tuesday announced the introduction of mutual fund service system, a platform on which mutual fund units will be traded through the stock exchange infrastructure, from November 30.
The Bombay Stock Exchange is also developing a similar platform with Central Depository Services. "BSE will launch a similar platform soon," said a BSE source.
Said A Balasubramanian, CEO, Birla SunLife Mutual Fund, "This is a welcome addition to the existing network."
The NSE platform, which has been set up with National Securities Depository, will be available on all business days between 9 am and 3 pm. Asset management companies, which are willing to provide this alternative mechanism to their potential customers, will have to enter into an agreement with the exchange/clearing corporation. Also, the AMC will have to notify the schemes that will be traded on this platform.
All trading members of the exchange who are registered with the Association of Mutual Funds of India as mutual fund advisors and who have signed up with specific AMCs will be eligible to participate in MFSS. Trading members will have to register with NSE as "participants".
A fully-automated on-line order collection system, called NEAT-MFSS, will be provided to the "participants", who can use their existing telecom network to connect to this system and enter requests for subscription and redemption of MF units. Participants can choose between physical and depository modes while capturing subscription/redemption requests.
The pay-in of funds for subscription will be through designated bank accounts. The subscription transactions will be settled on a T+1 basis according to the timelines specified by the clearing corporation. Pay-out of funds for redemption transactions will have to be directly made to investors from the registration and transfer agent for both physical and demat modes.
Those willing to participate in MFSS will have to open a separate bank account with any of the clearing banks identified by the clearing corporation. It will be the designated bank account for giving effect to fund debits under MFSS. The subscription amount per transaction has to be less than Rs 1 crore for participating in MFSS.
Rajiv Anand, MD & CEO, Axis AMC, said, "The evolution of an exchange as a distributor is great for the industry and distribution because the mechanism will become much simpler and easier for both investors and distributors."
However, he felt a couple of issues would need to be ironed out. At present, NSDL does not give the name of the broker in their statement of stock transaction - a critical issue in case of mutual funds because the AMC has to identify and pay trail commissions based on the statement.
