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Investor education programs on ETFs, enhancing liquidity by making large investors buy and redeem ETF units through exchanges rather than directly from fund houses and incentivising market makers can go a long way to make ETFs a better product, SEBI's Whole-Time Member Ananta Barua said at the Cafemutual Passives Conference 2022 (CPC 2022).
Barua said that a liquidity window is under consideration by SEBI to make it easier for investors to buy and sell ETFs easily and at the right price.
Poor liquidity of ETFs has been a major concern for the passive market and SEBI has been mulling ways to solve the issue. The regulator had even formed a committee to look into it. In its annual report 2020-2021, the regulator had said it plans to examine measures for the development of passive funds covering various aspects such as increase in the liquidity for ETFs on the exchange platforms by efficient market making and better disclosures and transparency regarding such funds.
At CPC 2022, Barua further said that passive funds are gaining grounds in India at a fast pace. He said that the share of passives in the total AUM of the mutual fund industry has grown manifold in the last few years to reach 13.4% at the end of March 2022, given the rising investor interest and launch of numerous passive funds by AMCs.
With an aim to popularise ETFs, SEBI is also laying special focus on debt ETFs. In a recent event conducted by industry body Assocham, Barua had said that SEBI is planning to come out with a framework to encourage more exchange-traded funds in debt securities to increase retail investors' interest in the market.
