{"id":2369,"date":"2021-02-17T05:23:01","date_gmt":"2021-02-17T05:23:01","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2369"},"modified":"2021-02-17T07:27:52","modified_gmt":"2021-02-17T07:27:52","slug":"mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/","title":{"rendered":"Mutual Fund Participation in ETCDs: New Norms Introduced by SEBI"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Recently, SEBI,\nby way of the powers conferred under the provisions of section 11 (1) of the\nSEBI Act 1992 along with the rule 77 of the SEBI (Mutual Funds) Regulations\n1996, have passed a Circular No. SEBI\/ HO\/ IMD\/ DF2\/ CIR\/ P\/ 2021\/ 10, issued on\n15.01.2021. The said circular deals with the amendment in the norms concerning\nMutual Fund Participation in ETCDs by SEBI.<\/p>\n\n\n\n<p>Also, it shall\nbe considerate to take into consideration that the said amendment has been made\nunder Circular No. SEBI\/ HO\/ IMD\/ DF2\/ CIR\/ P\/ 2019\/ 65 and SEBI\/ HO\/ IMD\/ DF2\/\nCIR\/ P\/ 2020\/ 96, issued on 21.05.2019 and 05.06.2020 respectively. Through\nthese Circulars, SEBI had permitted the Mutual Fund Participation in ETCDs. Further,\nthe term ETCD stands for Exchange Traded Commodity Derivatives. <\/p>\n\n\n\n<p>Further, it\nshall be significant to take into the note that SEBI had allowed the\nparticipation of Mutual Funds in Exchange Traded Commodity Derivatives by way\nof Hybrid Schemes, which includes the following:<\/p>\n\n\n\n<ul><li>Multi Asset Scheme, and;<\/li><li>Gold Exchange Traded Funds (ETFs) with an Investment Threshold\nof 10% of the NAV (Net Asset Value) on the former;<\/li><\/ul>\n\n\n\n<p>In this blog, we\nwill discuss about the changed norms concerning the Participation of Mutual Fund\nin ETCDs by SEBI.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3abb23545eb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3abb23545eb\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Concept_of_Mutual_Funds\" title=\"Concept of Mutual Funds\">Concept of Mutual Funds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Concept_of_Exchange_Traded_Commodities_Derivatives\" title=\"Concept of Exchange Traded Commodities Derivatives\">Concept of Exchange Traded Commodities Derivatives<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Purpose_for_Amending_Norms_of_Mutual_Fund_Participation_in_ETCDs\" title=\"Purpose for Amending Norms of Mutual Fund Participation in ETCDs\">Purpose for Amending Norms of Mutual Fund Participation in ETCDs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Amendments_Made_in_Mutual_Fund_Participation_in_ETCDs\" title=\"Amendments Made in Mutual Fund Participation in ETCDs\">Amendments Made in Mutual Fund Participation in ETCDs<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Things_to_Remember_regarding_Participation_of_Mutual_Fund_in_ETCDs\" title=\"Things to Remember regarding Participation of Mutual Fund in ETCDs\">Things to Remember regarding Participation of Mutual Fund in ETCDs<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Example_of_the_Changed_Norm\" title=\"Example of the Changed Norm \">Example of the Changed Norm <\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/mutual-fund-participation-in-etcds-and-new-norms-introduced-by-sebi\/#Official_SEBI_Circular_on_Participation_of_Mutual_Fund_in_ETCDs\" title=\"Official SEBI Circular on Participation of Mutual Fund in ETCDs\">Official SEBI Circular on Participation of Mutual Fund in ETCDs<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Mutual_Funds\"><\/span>Concept of Mutual Funds<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term Mutual\nFund means a company that is engaged in pooling money form the investors, and after\nthat, invests the same in various securities, such as Stocks, Short Term Debt,\nBonds, etc.<\/p>\n\n\n\n<p>Further, the combined holding of a mutual fund is known as Portfolio. Under this, the investors will buy shares in the mutual fund, and each share depicts the part of ownership in fund and the revenue it generates.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/revision-of-disclosure-format-by-sebi\/\">Revision of Disclosure Format by SEBI<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Concept_of_Exchange_Traded_Commodities_Derivatives\"><\/span>Concept of Exchange Traded Commodities Derivatives<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The term\nExchange Traded Commodities Derivatives or ETCDs denote futures and options,\ntogether with a standardised contract, traded on recognised stock exchanges.\nFurther, the most common ETDs include Index, Stock, Currency, Real Estate\nDerivatives, and Commodities.<\/p>\n\n\n\n<p>Also, an ETCD\ncan track both individual commodities and basket of various commodities and can\nwork as an interesting alternative to trading commodities in the future market<\/p>\n\n\n\n<p><strong>Moreover, the different types of Exchange Traded Commodities Derivatives are as follows:<\/strong><\/p>\n\n\n\n<ul><li>Stock Derivatives;<\/li><li>Index Derivatives;<\/li><li>Currency Derivatives;;<\/li><li>Commodities Derivatives;<\/li><li>Real Estate Derivatives;<\/li><\/ul>\n\n\n\n<p><strong>The most common benefits of ETCDs are as follows:<\/strong><\/p>\n\n\n\n<ul><li>Highly Liquid in Nature;<\/li><li>Process of Intermediation minimises the Risk of Default;<\/li><li>Works as Regulated Exchange Platform;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Purpose_for_Amending_Norms_of_Mutual_Fund_Participation_in_ETCDs\"><\/span>Purpose for Amending Norms of Mutual Fund Participation in ETCDs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The purpose\nbehind the amendment in the norms concerning Mutual Fund Participation in ETCDs\nare as follows:<\/p>\n\n\n\n<ul><li>To Protect the Interest of Investors;<\/li><li>To Promote Development of the Securities Market;<\/li><li>To Regulate the Securities Market;<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Amendments_Made_in_Mutual_Fund_Participation_in_ETCDs\"><\/span>Amendments Made in Mutual Fund Participation in ETCDs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Based on the\nCircular passed by SEBI, the main amendment made in the provision concerning\nParticipation of Mutual Fund in ETCDs is that, from now onwards mutual funds\nwill not write options, or purchase instruments, together with embedded written\noptions in goods, or on commodity futures.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Things_to_Remember_regarding_Participation_of_Mutual_Fund_in_ETCDs\"><\/span>Things to Remember regarding Participation of Mutual Fund in ETCDs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main thing to remember regarding the Participation of <a href=\"https:\/\/en.wikipedia.org\/wiki\/Mutual_fund\">Mutual Fund<\/a> is that except the provision mentioned above, all the other conditions, provisions, and stipulations concerning such participation will remain the same. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Example_of_the_Changed_Norm\"><\/span>Example of the Changed Norm <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Assume a mutual fund has taken delivery of 1 Kg of Gold on an exchange, then, in that case, it can start a short position on 1 kg contract of gold futures traded on that recognised <strong><a href=\"https:\/\/swaritadvisors.com\/learning\/top-10-benefits-of-listing-companies-on-a-stock-exchange\/\" class=\"text-primary\">stock exchange<\/a><\/strong>. <\/p>\n\n\n\n<p>That means this 1 kg\nwill not be calculated as Futures contracts and will facilitate the purchase or\nsale of an underlying commodity at a present price\/ cost for delivery on some\nfuture date.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In this article,\nwe have discussed in detail concerning the concept of Mutual Funds, Exchange\nTraded Commodities Derivatives, together with its participation in the Exchange\nTraded Commodity Derivatives. Also, we have tried to make our audience\nunderstand the concept by way of an example.<\/p>\n\n\n\n<p>However, in the\ncase of any doubt or query, reach out to <strong><a href=\"https:\/\/swaritadvisors.com\/\" class=\"text-primary\">Swarit Advisors<\/a><\/strong>, our experts are\nthere to solve out all your doubts.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Official_SEBI_Circular_on_Participation_of_Mutual_Fund_in_ETCDs\"><\/span>Official SEBI Circular on Participation of Mutual Fund in ETCDs<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n<a href=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/02\/Participation-of-Mutual-Fund-in-ETCDs.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">Participation-of-Mutual-Fund-in-ETCDs<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/annual-compliance-for-a-listed-company-as-per-sebi-regulations\/\">Annual Compliance for a Listed Company as per SEBI Regulations<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Recently, SEBI, by way of the powers conferred under the provisions of section 11 (1) of the SEBI Act 1992 along with the rule 77 of the SEBI (Mutual Funds) Regulations 1996, have passed a Circular No. SEBI\/ HO\/ IMD\/ DF2\/ CIR\/ P\/ 2021\/ 10, issued on 15.01.2021. The said circular deals with the amendment [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":2370,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[50,64],"tags":[393],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2369"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2369"}],"version-history":[{"count":6,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2369\/revisions"}],"predecessor-version":[{"id":2404,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2369\/revisions\/2404"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2370"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2369"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2369"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2369"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}