Mutual Funds to trade on the exchange
Nov 26, 2009

Author: PersonalFN Content & Research Team

Coming Monday (i.e Nov 30, 2009) investors will be able to transact in mutual funds through an online trading platform. The National Stock Exchange (NSE) platform - Mutual Fund Services System (MFSS), has been set up by the exchange along with National Securities Depositories Ltd. (NSDL). This will provide the much required ease and convenience to investors and also reduce paper trail.

To operationalise this, NSE has issued its operating guidelines for MFSS. The guidelines also answer some of the questions which we had raised in our last article on 'Mutual fund investing made easier'.

The guidelines are transparent and encouraging for investors to participate in mutual fund investing through this easy platform.

A summary of the guidelines are given below:

All Asset Management Companies (AMCs) who wish to provide this alternative mechanism will have to enter into an agreement with the Exchange/Clearing Corporation. Also, the AMCs will have to notify schemes which they wish to be traded on this platform. The exchange will keep its trading member brokers (herein known as participants) notified on additions and deletions of such offerings through prior notification.

Investors can put their transaction orders to buy or sell mutual funds with the participants. Brokers who wish to participate are required to apply to the Exchanges. In order to facilitate the trade, participants will be provided with a fully automated on-line order collection system called NEAT-MFSS. Only AMFI Registration Number (ARN) holders who have passed the AMFI certification examination will be eligible to participate in this MFSS.

The investors will be allowed to transact in MFSS at the current days NAV, on all business days of the Capital Market segment between 9 a.m. until 3 p.m.

The investors will be given an option to hold the units in physical mode or depository mode while placing orders for subscription / redemption requests on the MFSS. The subscription amount per transaction is required to be less than Rs. 1 cr.
Physical Mode

	Completed Scheme Application Form/ Redemption Slip	PAN Card	KYC Form*	Folio No.	Settlement	Statement of Account
Subscription	√	√	√	√	Physical	√
Redemption	√	√	√	√	Physical	√

*KYC form shall be submitted by clients in case of investments of Rs 50,000 and above
Depository Mode

	Demat Account	Completed Scheme Application Form/Redemption Slip	PAN Card	KYC Form*	Settlement	Statement of Account**
Subscription	√	-	√	√	Depository	-
Redemption	√	-	√	√	Depository	-

*KYC form shall be submitted by clients in case of investments of Rs 50,000 and above, at the time of demat account opening with the participant.

**Statement of account will not be required since the purchase and sale of units will be reflected in the demat account of the investor.

The subscription transactions shall be settled on a T+1 basis as per time lines specified by the Clearing Corporation. However, the payout in case of redemption of units will happen as per the scheme provisions and within the timelines as per SEBI regulations, as applicable from time to time.
Issues related to investor grievances arising out of the MFSS, will be handled by the Investor Grievance Cell of the exchange.

The guidelines, however do not address the question on how will Systematic Investment Plans (SIPs), Systematic Transfer Plans (STPs), Systematic Withdrawal Plans (SWPs), switches from one scheme to another, work under the trading platform? This is an impediment in SIP investing.

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