New Delhi, 22 April (PTI) Markets Regulator SEBI on Tuesday announced a change in cut-off timing to determine the Net Asset Value (NAV) in relation to the redemption or redemption of units in the overnight plans of mutual funds.
The change will allow for the time for overnight plans (MFOs) for units of mutual funds for stock brokers (SBS), or clearing members (CMS) and will fulfill the redemption requests with mutual funds after the market hours are closed.
For applications received till 3 pm, the conclusion of the day before the next trading day will be applied. For applications received after 3 pm, NAV will end the next trading day, SEBI said in his circular.
However, if the application is received through online mode, the cut-off time of 7 o’clock will be applicable to funds plans overnight.
The new time will be effective from June 1.
Investment in the night plans (MFOs) in mutual funds is a new avenue that has been made available to deploy client funds to clear stock brokers or members and ensures minimum risk changes of client funds due to night’s tenure and explosion for only risky government securities.
SBS/CMS ensures that client funds are invested only in an MFO that deploy funds in the risk-free government bond overnight repo markets and overnight in Tri-Party Repo Dealing and Settlement (TREPS).
In addition, such MFOs units must be in Demat form, and must be mortgaged with a clearing corporation at all times.
SEBI said in his counseling paper in January that overnight plans receive the money invested in securities with one day maturity on the next working day.
“To meet redemption requests, overnight plans do not need to make any sales transactions before market hours. Instead, overnight plans based on redemption requests, can decide not to re -establish maturity income received on T1 settlement date.
“Since for the amount of redemption requests received on T-Day, money is to be invested every day, such an amount is not reused on the T1 day and is used for payment instead. Due to this, the redemption timeline, whether at 3 pm or 7 pm, will not affect the ability to affect the ability to affect the ability of funds.”
