NEW DELHI: To ease the implementation of directions on upstreaming of client funds, the markets watchdog is planning to extend time to stock brokers/clearing members to un-pledge units of overnight mutual fund schemes and place redemption request with funds houses, after the close of market hours.
Accordingly, the regulator on Monday proposed that the cut-off timing to determine applicable net asset value (NAV) with respect to repurchase (redemption) of units in mutual-fund overnight schemes (MFOS) from existing 3 pm to 7 pm.
Earlier the Sebi had directed stock brokers and clearing members to upstream client funds to clearing corporations on an end-of-day basis.
Funds should be upstreamed wither as either cash, lien on fixed deposit receipts created out of clients’ funds, or pledge of units of MFOS created out of clients’ funds.
In a paper issued on Monday, Sebi said, “investment in MFOS, which is a new avenue made available to brokers/clearing members to deploy client funds, ensures risk transformation of funds (that are withdrawable on demand) available with brokers/clearing members due to overnight tenure and exposure to risk-free securities.”
Brokers and clearing members must ensure that client funds are invested in such MFOS that deploy funds into risk-free government bond overnight repo markets and overnight tri-party repo dealing and settlement.