The Securities and Exchange Board of India (SEBI) has lowered the regulatory fee that it charges market intermediaries, a move that is expected to bring down the overall trading costs for investors.
The fee that brokers have to pay to SEBI has been reduced by 33.33%, while the the fees levied on agri-commodity brokers has been cut by 93.33%.
The regulatory fee paid by stock exchanges has also been lowered by 80%. The move assumes significance as India has always featured among the most-expensive countries globally in terms of trading costs in the capital market. The board of the regulator, which met in Delhi on Friday, also tweaked the valuation norms for debt mutual funds, while allowing institutional investors like mutual funds and portfolio management services in the commodity derivatives segment.
The watchdog has said that credit rating agencies may provide valuation of money market and debt securities that are rated below investment grade, thereby providing uniformity in valuation across fund houses.
“The valuation agencies appointed by Association of Mutual Funds in India (AMFI) may provide valuation of money market and debt securities rated below investment grade,” SEBI said in a release, adding that fund houses would be responsible for fair valuation and may deviate from the valuation provided by such agencies subject to certain checks and balances. This is important considering that ratings agencies typically stop valuing securities once the rating falls below investment grade, thereby leading to lack of uniformity in pricing of such securities across fund houses.
Incidentally, the IL&FS episode saw many fund houses taking a hit in different proportions after the company defaulted on its payment obligations.
The regulator has also said that entities that acquire a significant stake in a listed entity as part of debt restructuring will not be eligible for exemption from open offer obligations.
This effectively implies that if Etihad acquires a stake in Jet Airways, it will have to make an open offer to acquire shares from the public shareholders. Such an exemption from making an open offer would, however, be available for banks and other financial institutions.
Meanwhile, the regulator has given its nod for the participation of MFs and portfolio managers in the exchange traded commodity derivatives segment.
Further, Category III Alternative Investment Funds, which are already permitted to participate in commodity derivatives, have now been permitted to deal with goods received in delivery against physical settlement of such contracts, if any.
“SEBI’s decision to allow entry of MFs and portfolio management services (PMS) for commodity trading is a very investor friendly move,” said Sanjit Prasad, CEO, India Commodity Exchange (ICEX).
“It will help deepen the nascent market. Investors of mutual funds will benefit as addition of commodity derivative as an asset class will lead to better portfolio diversification. Adding commodities in the portfolio involves some risk but the overall risk adjusted returns of the portfolio may improve,” he added.
Based on market feedback, the regulator has also tweaked the guidelines for Infrastructure Investment Trusts and Real Estate Investment Trusts.