Sebi allows mutual fund schemes to net cash market settlements
The regulator's decision aims to reduce temporary funding requirements and improve operational efficiency for mutual fund schemes.
The Securities and Exchange Board of India (Sebi) on Thursday permitted mutual fund schemes to settle cash market transactions on a net basis. According to reports by The Economic Times and Mint, the move is intended to lower funding needs and enhance market efficiency.
Under the new rules, mutual fund schemes can offset purchase and sale obligations within a single scheme and settlement cycle. However, the regulator specified that transactions must be outright, meaning they involve either a purchase or a sale of a security, but not both, within the same cycle.
The framework prohibits netting across different schemes belonging to the same fund. No inter-scheme funding or adjustments will be permitted, and schemes must fund any residual amounts where purchase obligations exceed sale proceeds.
The new regulations will come into effect from April 1, 2027. This facility was previously granted to foreign portfolio investors earlier this year.
Securities transaction tax and stamp duty will still be applied on a delivery basis. Derivatives, short sales, and securities lending and borrowing remain excluded from this framework.
The Association of Mutual Funds in India (Amfi) will determine the implementation standards. Clearing corporations and stock exchanges have been directed to update their systems and reporting formats to support the change.