Mutual Fund Service System (MFSS)

by Gopal Gidwani on December 29, 2009 · 2 comments

in Others,Uncategorized

Introduction
Initially Mutual Fund units could be bought and sold through a Mutual Fund agent or the Mutual Fund House directly. Now SEBI has introduced a third avenue. Under this system transactions in mutual fund schemes (buying and selling) will be facilitated through the stock exchange infrastructure. This facility will be available on all business days when the exchanges are open from 9:00 am to 3:00 pm.

Mutual Fund Service System (MFSS) from NSE
In view of the above development the National Stock Exchange (NSE) has recently announced “Mutual Fund Service System” (MFSS) a new trading platform for mutual funds beginning 30th November 2009. “MFSS” means a facility where the Participants can buy / redeem units of eligible mutual fund schemes using network and order collection mechanism provided by National Stock Exchange of India Ltd.
Asset Management Companies who want to provide this alternate trading platform to their customers will have to enter into an agreement with the Exchange / Clearing Corporation. AMC Customers will be able to place requests for subscription and redemption of units of schemes available on MFSS. To avail the MFSS facility investors have to register themselves as clients with the Participant. Under this system the subscription amount per transaction should be less than Rs 1 crore.

Trade Settlement
The pay-in of funds for subscription (units bought) will be through the designated bank accounts. The transactions will be settled on a T+1 basis. The pay-out of funds for redemption (units sold) will be directly made by the Registrar & Transfer Agents (RTA) for transactions in both modes; physical as well as demat mode.

MFSS will increase the reach of Mutual Fund Schemes
The launch of this new trading platform will increase the reach of mutual fund schemes to more cities as trading terminals are spread all over the country. The stock exchange infrastructure spans across 1500 towns and cities through 2,00,000+ terminals. This network can be leveraged to provide potential mutual fund investors an opportunity to participate in capital markets at places where AMCs don’t have a presence. The MF units can be bought and sold through registered stock brokers of recognised stock exchanges.

Trading Modes
Securities settlement can be done either through the RTA (if physical mode) or through the depository (if demat mode). In cases where the investor desires to hold units in dematerialised form he / she will be given a demat statement by the Depository Participant. Currently only NSDL is the depository for demat transactions.
Investors holding securities in physical format can convert them into dematerialized format with the help of DPs.
The brokers will have to place the order for subscription or redemption through their terminals and generate a unique confirmation number for the order. This order number will act as the confirmation for the investors. Transactions will be settled on a T+1 basis.
Subscription Transactions: For subscription orders placed in ‘Physical’ mode, the investor will get the Statement of Account from the RTA directly. For subscription orders placed in ‘Demat’ mode the demat statement will be provided by the Depository Participant. Also the RTA will credit the depository account of the investor directly with the allotment details.
Redemption Transactions: In case of redemption transactions the redemption proceeds will be sent to the investor directly by RTA as per the bank account details recorded with the RTA.

Charges
To promote the MFSS in the initial stages the National Stock Exchange (NSE) and National Securities Depository Limited (NSDL) have waived charges. But they may levy charges at a later stage once the trading volumes through this platform pick up.

UTI’s schemes available for trading on the MFSS
Unit Trust of India (UTI) is the first AMC to offer its 30 select schemes for trading through this platform. Other AMCs are expected to join soon in offering their schemes for trading through the stock exchanges. All schemes that are available on MFSS will be informed to brokers and other participants by the exchanges. The exchange shall also inform the participants of additions and deletions of mutual fund schemes available for trading on the MFSS platform.

Other Details
The stock brokers who want to participate in MF trading will have to clear the AMFI certification exam for mutual funds. Any investors’ issues and grievances related to the MFSS will be handled by the investor grievance cell of the exchange.

Please do let us know your comments on the article by commenting in the section below or writing to us at gopal_gidwani@yahoo.com

{ 2 comments… read them below or add one }

kaustubh patil November 7, 2010 at 7:49 am

Where do I get the information of which AMC’s have facility for this ? I know this came along sometime back but hasn’t been in the news.

Reply

Gopal Gidwani November 7, 2010 at 2:30 pm

Hi Kaustubh,
To know which AMC’s have this facility you will have to check the NSE website or the Websites of the respective AMC’s about whom you want to know.

Reply

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