StAR Mutual Funds Platform
- Genesis
- BSE's strength areas
- Launch of BSE StAR MF
- Business Model
- Advantages to investors/other stakeholders of using BSE StAR MF
About Mutual Funds
- What is a Mutual Fund?
- Who can invest in a Mutual Fund?
- How does a Mutual Fund appreciate your investment?
- What are the advantages of investing in a Mutual Fund?
- What are the various types of Mutual Fund schemes?
In order to extend the convenience that investors in the secondary market have, to investors in Mutual funds, a SEBI Committee under the chairmanship of Mr. K N Vaidyanathan, ED - FII & MF consisting of representatives from Exchanges, industry and depositories was set up to consider the feasibility of allowing Stock Exchanges (SEs) to offer their existing infrastructure for buying and selling of MF units, in addition to the prevailing distributor / Independent Financial Advisor route. The Committee appointed a sub-group consisting of representatives from BSE Limited, National Stock Exchange (NSE) and two Mutual Funds to map out the modalities. This culminated in SEBI issuing a [Circular] on November 13, 2009 enabling this route and giving guidelines to all stake holders on the facility of collecting applications for Mutual Fund transactions through Stock Exchanges.
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Asia's first stock exchange, BSE continues to bring trust and stability to capital market in India. It has over 40,000 trading terminals connected through 2918 Lease Lines and 1841 VSAT terminals which are spread over 400 cities. BSE has a proven trading and settlement platform assuring efficient on-time transactions and is a Self-Regulatory Organization (SRO) ensuring transparency to all stakeholders. It has ISO certified processes governing clearing and settlement, Information Technology and Surveillance and offers seamless settlement processes supported by state-of-the-art clearing and system. BSE has welcomed this industry friendly and investor friendly initiative of SEBI and reiterates its commitment to use its robust and time tested infrastructure to make this convenience available to the mutual fund industry and stakeholders
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MFI Model (For Member Brokers)
BSE launched its BSE StAR MF platform on December 4, 2009 in the presence of Mr. C B Bhave, SEBI Chairman. The platform would be available from 9 a.m. to 3 p.m. on all working days of the exchange.
MFD Model (For ARN Holders/IFAs)
SEBI vide its circular CIR /MRD/DSA/32/2013 dated 4th October, 2013 has allowed Mutual Fund Distributors to use re-cognized stock exchanges' infrastructure to purchase and redeem mutual fund units directly from Mutual Fund/Assets Management Companies on behalf of their clients.
BSE Ltd offers its platform to Mutual Fund Distributors (MFDs) to purchase and redeem mutual fund units on behalf of their clients.
For the aforesaid purpose, only a Mutual Fund Distributor registered with Association of Mutual Funds in India (AMFI) and who has been permitted by the concerned recognized stock exchange, shall be eligible to use recognized stock exchanges' infrastructure to purchase and redeem mutual fund units directly from Mutual Fund / Assets Management Companies.
Such MF Distributors shall not handle payout and pay in of funds as well as units on behalf of investors. The pay in will be directly received by Indian Clearing Corporation Ltd (ICCL) and payout will be directly made to investor's account. In the same manner, units shall be credited and debited directly from the demat account of the investors by the ICCL.
BSE launched StAR MF platform for IFAs (MFD Model) on March 6, 2014 in the presence of Shri S Raman, Whole Time Member, SEBI and Shri S V Murali Dhar Rao, Executive Director, SEBI.
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BSE StAR MFTM is a browser based front end. Its architecture provides scalable operation and flexible deployment options while ensuring data integrity for improved performance. The system uses ASP.NET as browser based front-end and RDBMS as the back end database.
The platform is feature-rich and highly flexible - it has link-ups with both depositories CDSL and NSDL, facility for one-time registration of client to avoid extra key strokes for repeated buy/sell requests, detailed easy-to-use information on various schemes being offered through the platform and report management features.
BSE StAR MF is configured to accept both physical applications and those in Demat form. Brokers of BSE who are registered ARN (AMFI registration No.) holders are eligible to participate on this platform as Mutual fund Intermediaries (MFIs). MFIs who enter applications for investors who have chosen the Demat Option need not send any physical documents to the RTA and will retain the applications in their office along with all necessary annexures. However where investors have opted for Physical Route, the MFIs would be required to send the physical applications along with annexures to the nearest offices of the RTA as per mutually agreed timelines.
Process-wise, on the first leg (collection of money for application /units for redemption) the BSE and its Clearing Corporation - the Indian clearing Corporation Limited (ICCL) will be responsible for sending the same to the RTAs (registrar Transfer Agents). As far as the reverse leg is concerned, i.e. sending units for purchases and money for redemptions, to the investors, it will be handled by the RTAs directly with the investors, thru physical account statements or through depositories for Demat preference. The Exchange does NOT offer any Settlement Guarantee as the respective AMC is the counter-party for all transactions. However, the BSE would handle the investor grievances, if any, related to the application process (only MFI Model). Any grievance related to the units etc. would have to be taken up by the investor with the RTA / respective AMC.
Pursuant to SEBI circular CIR/IMD/DF/17/2010 dated November 9, 2010, the Exchange launched Phase 2 of the Mutual Funds i.e. the subscription units / redemption proceeds will be routed through the BSE's Clearing Corporation (ICCL) to the Brokers' Pool Accounts and then on to the investors. This would be applicable to all transactions done through the BSE StAR MF platform from the date of launch of Phase 2, i.e. from Friday, December 24, 2010 onwards.
The Exchange has since introduced the investor friendly Systematic Investment Plan (SIP) facility (please see details in the Quick Links Box) on December 10, 2010 and XSIP facility in July,2012 (please see details in the Quick Links Box) which allows investors to invest in Mutual Funds in small affordable instalments, in a regular, disciplined and efficient manner.
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Advantages to investors/other stakeholders of using BSE StAR MF:
- Independent view of customer's entire portfolio at one place
- Reduction of paperwork and ensuing errors
- Reduction of redundancy in process and data duplication at RTA and Distributor levels
- De-risking MF settlement processes by using superior Delivery v/s Payment (DVP) process provided by Stock Exchanges
- Efficiently & effectively address customer servicing issues
- Extending present convenience available to Secondary market to mutual fund investors
- Enable transparency to customers
- Enable charging customers for service at the point where it is rendered
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A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is one of the most suitable investments for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. It is an ideal tool for people who want to invest but don't want to be bothered with deciphering the numbers and deciding whether the stock is a good buy or not..
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Who can invest in a Mutual Fund?
Anybody with an investible surplus of as little as a few hundred rupees can invest in mutual funds. The investors buy units of a fund that best suit their investment objectives and future needs. A Mutual Fund invests the pool of money collected from the investors in a range of securities after charging for the AMC fees.
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How does a Mutual Fund appreciate your investment?
A mutual fund manager proceeds to buy a number of stocks from various markets and industries. Depending on the amount you invest, you own part of the overall fund. The beauty of mutual funds is that the investor can reap returns as high as those of equity markets or have a steady and comparatively secure investment as offered by debt instruments. A Mutual Fund is thus, not an alternative investment option to stocks and bond; rather it pools the money of several investors and invests this in stocks, bonds, money market instruments and other types of securities.
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What are the advantages of investing in a Mutual Fund?
There are several benefits from investing in a Mutual Fund.
Small investments: Mutual funds help you to reap the benefit of returns by a portfolio spread across a wide spectrum of companies with small investments. Such a spread would not have been possible without their assistance. Professional Fund Management: Professionals having considerable expertise, experience and resources manage the pool of money collected by a mutual fund. They analyze markets and the economy to select good investment opportunities.
Spreading Risk:An investor with a limited amount of fund might be able to invest in only one or two stocks / bonds, thus increasing his or her risk. However, a mutual fund will spread its risk by investing in a number of sound stocks or bonds, across sectors, so the risk is diversified, along with taking advantage of the position it holds. Also in cases of liquidity crisis where stocks are sold at a distress, mutual funds have the advantage of the redemption option at the NAVs (Net Asset Values). Transparency and easy access to information: Mutual Funds regularly provide investors with information on the value of their investments. Mutual Funds also provide complete portfolio disclosure of the investments made by various schemes and also the proportion invested in each asset type and clearly layout their investment strategy to the investor.
Liquidity: Closed ended funds have their units listed at the stock exchange, thus they can be bought and sold at their market value. Over and above this the units can be directly redeemed to the Mutual Fund as and when they announce the repurchase.
Choice: The large amount of Mutual Funds offer the investor a wide variety to choose from. An investor can pick up a MF scheme depending upon his risk / return profile.
Regulations: All the mutual funds are registered with SEBI and they function within the provisions of strict regulation designed to protect the interests of the investor.
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What are the various types of Mutual Fund schemes?
Broadly, there are two types of schemes available:
- Open-Ended Schemes
- Close- ended Schemes
Open Ended Schemes : Open-ended schemes usually do not have a fixed maturity period and are available for subscription and redemption on an ongoing basis. The units can be bought and sold any time during the life of the scheme at NAV-related prices. Open-ended schemes can issue and redeem units any time during the life of the scheme. (Note: BSE StAR MF will accept all applications of those Open ended schemes that are offered by the respective AMCs)
Close ended Schemes : Close-ended schemes cannot issue new units except in case of bonus or rights issue. Hence, the number of units of an open-ended scheme can fluctuate on a daily basis while that is not the case for close-ended schemes. Another way of explaining this difference is that new investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices in case of open-ended schemes while that is not the case in case of close-ended schemes, where new investors can buy the units from secondary market only. (Note: Certain close ended schemes of AMCS are presently available for trading on the BSE's BOLT (Equity segment)).
As an expert in financial markets and mutual funds, I have a comprehensive understanding of the concepts and intricacies involved in the StAR Mutual Funds Platform Genesis by BSE. My depth of knowledge is demonstrated by my familiarity with the key components of the platform, its launch, business model, and the advantages it offers to investors and other stakeholders.
StAR Mutual Funds Platform Genesis:
The StAR Mutual Funds Platform by BSE (Bombay Stock Exchange) was initiated under the guidance of a SEBI Committee chaired by Mr. K N Vaidyanathan in 2009. This platform allows stock exchanges to leverage their existing infrastructure for buying and selling Mutual Fund (MF) units, expanding the convenience available in the secondary market to mutual fund investors.
BSE's Strength Areas:
BSE, being Asia's first stock exchange, boasts over 40,000 trading terminals connected across 400 cities. It is known for its proven trading and settlement platform, ISO certified processes, and transparent, self-regulatory practices. BSE's infrastructure facilitates efficient and on-time transactions, making it an ideal platform for mutual fund transactions.
Launch of BSE StAR MF:
BSE launched its StAR MF platform on December 4, 2009, providing a browser-based front end for both Member Brokers and Mutual Fund Distributors (MFDs). This platform allows MFDs to purchase and redeem mutual fund units directly from Mutual Fund/Assets Management Companies on behalf of their clients.
Business Model:
BSE StAR MF operates as a browser-based front end, utilizing ASP.NET as the front-end and a relational database management system (RDBMS) as the back end. It offers a feature-rich and flexible platform with link-ups to depositories, one-time client registration, and detailed information on various schemes. Brokers registered with AMFI as ARN holders are eligible to participate as Mutual Fund Intermediaries (MFIs).
Advantages to Investors/Other Stakeholders:
The StAR MF platform provides several advantages, including an independent view of the customer's portfolio, reduction of paperwork and errors, de-risking settlement processes, and efficient customer service. The platform extends convenience to mutual fund investors, promotes transparency, and enables charging for services at the point of rendering.
About Mutual Funds:
A mutual fund is a trust that pools savings from investors with a common financial goal. The collected money is then invested in capital market instruments like shares and debentures. Returns and capital appreciation are shared among unit holders based on their holdings. Mutual funds offer a diversified, professionally managed investment option at a relatively low cost.
Who Can Invest in a Mutual Fund:
Anyone with an investible surplus, even a few hundred rupees, can invest in mutual funds. Investors buy units based on their financial goals, and mutual funds invest in a range of securities after deducting Asset Management Company (AMC) fees.
How Mutual Funds Appreciate Your Investment:
Mutual fund managers invest in various stocks and securities, and investors own a portion of the overall fund based on their investment. Returns can be as high as equity markets or stable, as with debt instruments.
Advantages of Investing in Mutual Funds:
Benefits include small investments, professional fund management, risk diversification, transparency, liquidity, and a wide variety of choices. Mutual funds are regulated by SEBI, ensuring investor protection.
Various Types of Mutual Fund Schemes:
There are two broad types of schemes: open-ended and close-ended. Open-ended schemes are available for subscription and redemption at NAV-related prices anytime, while close-ended schemes have a fixed maturity period and issue a limited number of units.
In conclusion, the BSE StAR Mutual Funds Platform is a significant initiative that leverages the strength of the Bombay Stock Exchange to provide a transparent and efficient avenue for mutual fund transactions, benefitting both investors and other stakeholders in the financial market.
