What is the concept of swing pricing?
A Securities and Exchange Board of India (Sebi) consultation paper on 19 July floated the concept of swing pricing for open-ended debt mutual funds. Essentially, at times of market stress, the scheme’s exiting investors will get a lower net asset value (NAV). According to Sebi, swing pricing will be optional during normal times, but compulsory during so-called market dislocation. During such dislocation, full swing will kick in imposing costs on exiting investors, regardless of the size of redemptions. In normal times, partial swing will be imposed that will only kick in if flows exceed specified thresholds.
