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At the recently held Cafemutual Confluence 2022, Shri Ananta Barua, Whole-Time Member, SEBI said that ‘liquidity window’ can help the MF industry add more investors through ETFs.
Earlier, SEBI has allowed fund houses to provide ‘liquidity window’ facility through which fund houses can issue fresh units or facilitate redemption directly to individual investors.
Often in ETFs, only large ticket redemption and creation of units happen through AMCs. The rest is left to market makers. As a result, investors end up incurring high impact cost due to poor liquidity in ETFs.
Further, Shri Barua shared the measures taken by the regulator to ease liquidity in ETFs.
He spoke about the new framework issued via circular dated May 23, 2022.
Here are some of the key highlights:
The framework mandates each AMC to appoint at least two market makers who are members of the stock exchanges for providing continuous liquidity in ETFs
Additionally, AMCs can create or redeem ETF units without upfront payment of 100% value of these units or upfront delivery of these units by market makers, respectively.
To enhance liquidity in ETFs on stock exchange platform, the framework has introduced a threshold of greater than Rs. 25 crore for direct trade with AMCs. For other transactions, they need to trade on stock exchange. This threshold doesn’t apply to market makers.
Here’s a teaser of Shri Ananta’s session. You can watch the entire video along with other CC 22 videos at a nominal price of Rs. 499 only. Simply write to us at fouzia@cafemutual.com and get ready to march towards Rs. 100 lakh crore.
