SEBI introduces swing pricing mechanism for debt mutual funds

Capital market regulator SEBI has announced swing pricing mechanism for all debt mutual fund schemes in the event of market dislocation. The move is aimed at discouraging large investors from sudden redemptions and protect investors in case of such an order

The new norms will come into effect from next March 2021. Swing pricing is a mechanism to apportion the cost of redemption and purchase requests of investors whose large orders cause adent in the Net Asset Value. Swing pricing allows a mutual fund to make adjustments to the NAV, so that when large investors stampede out those left behind do not take undue hits from transaction costs or fire sales.

Swing pricing will be exempted for overnight, gilt and gilt with 10 year maturity funds and redemptions up to Rs 2 lakh for each scheme both in normal and market dislocation times.

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