Summary
- The Securities and Exchange Board of India (Sebi) has proposed net settlement for mutual fund transactions in the cash market to enhance liquidity and improve settlement efficiency.
- This framework allows mutual funds to net funds for outright purchases and sales on recognized stock exchanges, while maintaining gross delivery for underlying securities.
- Sebi highlighted that current gross funding requirements create liquidity pressures, especially during index rebalancing and large investor activities.
- The proposal includes safeguards, ensuring netting occurs only at the individual scheme level without inter-scheme adjustments, while delivery-based settlement remains unchanged.
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