The Securities and Exchange Board of India (SEBI) on May 23, 2022 has issued Circular on Development of Passive Funds. This has come into force on July 1, 2022.
The following has been stated after reviewing the regulatory framework for passive funds namely: -
• Debt ETFs/Index Funds could be based on indices comprising of: -
a. Corporate Debt Securities (Corporate debt indices)
b. Government Securities (G-sec), T-bills and/or State Development Loans (SDLs)(G-sec indices)
c. A combination of Corporate Debt Securities and G-sec/T-bills/SDLs (Hybrid debt indices).
• Norms for Market Making Framework for ETFs: -
1. AMC shall appoint at least two Market Makers (MMs), who are members of the Stock Exchanges, for ETFs to provide continuous liquidity on the stock exchange platform. MM shall transact with AMC only in multiples of creation unit size.
2. The AMC shall have an approved policy regarding market making in ETFs based on the framework for market making.
3. AMCs shall facilitate in-kind creation and redemption of units of ETFs (including Debt ETFs) by MMs on a best effort basis.
• Disclosure Norms for ETFs/Index Funds: -
1. The debt and equity ETFs/Index Funds shall disclose the following on monthly basis: -
i. Name and exposure to top 7 issuers and stocks respectively as a percentage of NAV of the scheme.
ii. Name and exposure to top 7 groups as a percentage of NAV of the scheme.
iii. Name and exposure to top 4 sectors as a percentage of NAV of the scheme.
[Notification No. SEBI/HO/IMD/DOF2/P/CIR/2022/69]
