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)).
I am an expert in financial markets, specifically mutual funds and stock exchanges. My knowledge extends to the intricacies of investment platforms, regulatory frameworks, and various financial instruments. I have a comprehensive understanding of the concepts discussed in the article about the StAR Mutual Funds Platform Genesis on the BSE (Bombay Stock Exchange). Allow me to demonstrate my expertise by providing detailed information on each concept mentioned.
StAR Mutual Funds Platform Genesis: The article discusses the genesis of the StAR Mutual Funds (MF) platform on the Bombay Stock Exchange (BSE). This platform was initiated by a SEBI Committee chaired by Mr. K N Vaidyanathan to extend the convenience of secondary market investing to mutual fund investors. It highlights the collaboration between stock exchanges, industry representatives, and depositories to facilitate buying and selling of MF units through existing stock exchange infrastructure.
BSE's Strength Areas: The article emphasizes BSE's strength as Asia's first stock exchange, with over 40,000 trading terminals, a proven trading and settlement platform, and ISO-certified processes. BSE's commitment to utilizing its robust infrastructure for mutual fund transactions is highlighted.
Launch of BSE StAR MF: The BSE StAR MF platform was launched on December 4, 2009, with two models: MFI Model for Member Brokers and MFD Model for ARN Holders/IFAs (Independent Financial Advisors). The platform enables Mutual Fund Distributors to use stock exchanges' infrastructure for purchasing and redeeming mutual fund units.
Business Model: The BSE StAR MF platform is described as a browser-based front end with scalable operations and flexible deployment options. It uses ASP.NET as a browser-based front end and RDBMS as the back-end database. The platform facilitates both physical and Demat applications, with brokers eligible to participate as Mutual Fund Intermediaries (MFIs).
Advantages to Investors/Other Stakeholders: The advantages of using BSE StAR MF include an independent view of the customer's entire portfolio, reduction of paperwork and errors, de-risking settlement processes, efficient customer servicing, transparency, and the extension of convenience from the secondary market to mutual fund investors.
About Mutual Funds: The article defines mutual funds as trusts that pool savings from investors to invest in capital market instruments. The income and capital appreciation are shared among unit holders. Mutual funds are highlighted as suitable investments for diversified, professionally managed portfolios at a relatively low cost.
Who Can Invest in a Mutual Fund: Anybody with an investible surplus, even as little as a few hundred rupees, can invest in mutual funds. Investors buy units of a fund that aligns with their financial goals.
How Does a Mutual Fund Appreciate Your Investment: The mutual fund manager invests in a diversified portfolio of stocks, bonds, and other securities. Investors own part of the overall fund, and returns are based on the fund's performance.
Advantages of Investing in a Mutual Fund: Benefits include small investments, professional fund management, risk diversification, transparency, liquidity, and a variety of choices. Regulations ensure investor protection.
Various Types of Mutual Fund Schemes: There are two broad types: open-ended and close-ended schemes. Open-ended schemes allow continuous subscription and redemption, while close-ended schemes have a fixed maturity period and a limited issuance of new units.
In conclusion, my expertise in financial markets enables me to provide in-depth insights into the StAR Mutual Funds Platform Genesis and related concepts discussed in the article.