The Hindu : Business : MFs allowed to sell govt. securities

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Thursday, Apr 17, 2008
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MFs allowed to sell govt. securities

Special Correspondent

Can participate in When-Issued market

MUMBAI: In its efforts to further develop the debt market, the Securities and Exchange Board of India (SEBI) has now decided to allow mutual funds to sell government securities (G-Secs) contracted for purchase in DVP (delivery versus payment) III mode in accordance with the guidelines issued by the Reserve Bank of India in this regard.

Under the DVP III mode of settlement, it is possible to sell government securities already contracted for purchase without taking delivery provided the transaction is guaranteed by an approved central counterparty, namely, Clearing Corporation of India Ltd (CCIL).

At present, mutual funds cannot sell such securities contracted for purchase as they are required, under SEBI Regulations, to take actual physical delivery of securities.

This decision, taken at the SEBI board meeting held on Wednesday here, will put mutual funds on a par with other market participants such as banks, primary dealers and insurance companies as they can now go in for the net settlement of government securities transactions.

The SEBI board also approved the participation of mutual funds in the when-issued (WI) market.

(A when-issued market is one where trading takes place in that bond before the issuer sells the securities in the primary market). “Necessary amendments to SEBI (Mutual Funds) Regulations, 1996 will follow,” stated a SEBI release.

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