Fairness ETFs can now be used as collateral

Mumbai: The Securities and Change Board of India (Sebi) on Wednesday allowed fairness change traded funds for use as collateral.

“Primarily based on the suggestions acquired from market contributors, advice of Secondary Market Advisory Committee (SMAC) of Sebi and taking into consideration the emergence of change traded funds (ETFs) as an funding product with numerous benefits akin to transparency, diversification, decrease price, and so forth., it has been determined to permit models of fairness change traded funds (fairness ETFs)… as an eligible safety for MTF(margin buying and selling facility) in addition to an eligible collateral beneath MTF,” Sebi stated in a round.

The regulator stated the preliminary margin payable by the consumer to the inventory dealer ought to be within the type of money, money equal or fairness ETFs.

The shares or models of equityETFs deposited as collateral with the inventory dealer for availing collaterals and the shares or models of fairness ETFs bought beneath the funded shares ought to be identifiable individually and no co-mingling can be permitted for the aim of computation of funding quantity, Sebi stated.

“Whereas offering the MTF, the inventory dealer shall make sure that publicity in direction of shares and models of fairness ETFs bought beneath MTF and collateral stored within the type of shares and models of fairness ETFs are nicely diversified. Inventory brokers shall have applicable board accepted coverage on this regard,” the regulator stated.