International Trade

Trading of mutual funds is done in much the same way as the stocks are traded in the stock market. Just like stocks, now you would be able to trade the mutual funds on the stock market also.

Recently the National Stock Exchange (NSE) launched the new system for trading the mutual funds known as 'Mutual Fund Service System' (MFSS), on November 30th. The Bombay Stock Exchange has also introduced its version of trading in the mutual funds known as BSE Star MF that was introduced on December 4. This was after getting the requisite SEBI approvals for trading of the mutual funds through the existing channels of the stock exchange.

These new platforms have been launched with the initiative of increasing the retail participation of the investors. This will also lead to an increase in the volumes of MF's that are traded. Since the stock exchanges have a number of trading terminals that are present all across the country, it helps retail investors get a better access than the asset management companies (AMC) existing network. Now retail investors need not locate a retail AMC distributor for trading in the MF's.

Now the investors are able to invest through the members of the stock exchange and who is also listed as a member of the Association of Mutual Funds of India (AMFI). Quite conveniently whenever the members wish to subscribe or redeem their MF units, then they can do so through the registered members of the AMFI.

Both physical and the depository mode can be availed by the retail investors. Those that wish to do so through the depository method would only need to open a demat account.

Orders for redemption as well as subscription can be given between the trading hours. The trading hours in which the retail investors can operate are between 9 AM in the morning till 3 PM in the evening. Doing within this time, the subscribers will be able to take benefit of the same days NAV for the particular mutual fund.

These changes will help the investors to know their stock positions as well as MF positions from the same report. Settlements for the MF's are also expected to be made within T+1 days. At this time, experts are also pointing out that the new system merely represent the routing system and is not effectively allowing the investors to trade with each other over this platform.

Trading in the MF will also attract tax. For those that are investing and trading in equity linked schemes, they will have to pay a securities transaction tax (STT), while those trading in debt and liquid funds will have to give a capital gains tax liability.

Many distributors don't see it as an improvement over the previous system, since they feel that volumes of MF trade won't increase substantially. Further the distributors have also been hurt since the time SEBI has abolished the entry loads for the mutual funds.