Silver ETFs will have to invest at least 95% of the net assets in silver and silver-related instruments and ensure that tracking error does not exceeds 2%, according to silver ETF norms released by SEBI.
The regulator said fund houses could invest up to 10% in Exchange Traded Commodity Derivatives (ETCDs) having silver as underlying asset. However, the 10% limit will not be applicable if the scheme invests in the instrument with the intention to take delivery.
Further, AMCs will have to disclose the NAV of silver ETFs daily on their website. They also have to publish indicative NAVs on stock exchange platforms.
The ETFs will be benchmarked against the price of silver, SEBI said in a circular on Wednesday.
Here are other norms specified by SEBI:
- Physical silver should be standard 30 kg bars of 99.9% purity confirming to London Bullion Market Association Good Delivery Standards.
- AMCs have to appoint 'authorised participants' and 'market makers' to provide liquidity
- Large investors can directly buy or sell units from mutual funds
- If the tracking error exceeds 2% due to unavoidable reasons, the management will have to take the approval of Board of AMC and Trustees
- AMCs will have to disclose tracking error, market risks, liquidity risks and risks associated with handling of physical silver on their SID
- AMCs have to appoint dedicated fund managers to manage silver ETFs
