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Home / Money / Calculators /  BSE’s new MF platform to open on 6 March

There’s a good chance that your neighbourhood mutual fund (MF) distributor would soon start to offer your MF units in dematerialized (demat) form. BSE Ltd, Asia’s oldest stock exchange, is all set to launch its MF transaction platform on 6 March. Called BSE StAR MFD, this platform will allow independent financial advisers (IFAs) or MF distributors to directly buy and sell MF units on the stock exchange, as against the earlier method whereby they had to go only through registered stock brokers.

In 2009, the capital markets regulator, Securities and Exchange Board of India (Sebi), allowed stock exchanges to offer MFs. But there was a glitch. While stock brokers became eligible, IFAs (totalling almost 48,000) got left out. To be able to buy and sell MFs on behalf of their customers, IFAs had to become sub-brokers to registered brokers. As a result, IFAs did not warm up to the stock exchange platforms and volumes remained negligible.

As per data available on BSE and National Stock Exchange (NSE), less than 1% of total MF inflows came through the stock exchanges.

Budget 2013 allowed IFAs to come on the stock exchange platforms. It had allowed distributors to directly buy and sell MFs from stock exchanges, using a limited membership window. At BSE StAR MFD, IFAs will need to pay just 15,000 as a one-time fee to be able to hop on. There is no additional cost for the investor, except for the demat charges. BSE Ltd’s earlier platform for stock brokers will continue to co-exist with BSE StAR MFD.

So far, only 65 IFAs across India have registered on BSE StAR MFD. The NSE, too, has worked out its limited membership window for IFAs; it’s in talks with distributors at present and is expected to launch it soon.

How it works

Unlike the earlier version of BSE’s MF platform (where money and units first come in the broker’s account before moving out), under BSE StAR MFD, the IFA’s role is limited to facilitating the transaction. The units and the money will move directly from the investor’s account to the MF’s.

Here’s what you will need to do. Since MFs on the stock exchanges are available only in demat form, you will need to have a demat account.

Once you complete your know-your-client (KYC) registration, you need to submit your mobile phone number, demat account number, bank account number and Permanent Account Number (PAN) to your distributor, who will then submit it to BSE. The exchange will get your details verified with your depository within 24 hours.

Once you decide which scheme you would like to invest in, call up your distributor and she will place your order with BSE. You will then get a confirmation SMS and an email asking you to pay for the order.

How do you pay?

BSE will use one of NPCI’s products called Interbank Mobile Payment Service (IMPS). Under this, you have to register your mobile phone number with your bank.

Your bank will then generate a 7-digit number, called mobile money identifier (MMID), as well as a password called m-PIN.

Similarly, BSE (through its own clearing corporation) will also have an MMID. To transfer money, you need to know the receiver’s MMID, in this case BSE’s. You can then authenticate the payment using your m-PIN using the IMPS-enabled mobile banking application on your smartphone. You can also make payments by sending an SMS.

These modes of payment are in addition to the regular ways of transferring funds using real-time gross settlement (RTGS) system and the National Electronics Funds Transfer (Neft) system, using Internet banking.

“The beauty of IMPS is that the payment can be done 24 hours a day, 365 days a year. The other payment mechanisms, like RTGS or Neft, have time limitations", says V. Balasubramaniam, chief business officer, BSE. Under RTGS, you can make payments between 9am and 4.30pm on weekdays and between 9am and 2pm on Saturdays. Under Neft, you can make payments between 8am and 7pm on weekdays (and till 1pm on Saturdays).

The IMPS may be more convenient, but don’t forget the cut-off times for placing the order and then making the payment for it (see table).

“Most of my customers already have a demat account because they buy and sell equity shares. Buying and selling funds on the stock exchange will work for them because they get all their holdings in a single demat account statement," says Hyderabad-based MF distributor M.S. Shabbir, who was the first distributor to register with BSE StAR MFD way back in October 2013. “I will make those who don’t have a demat account open one soon because it will help them in the future."

The physical future

At present, the units that you buy on any of the existing stock exchange platforms go into your demat account. With BSE StAR MFD as well, your units will to go to your demat account. So, your demat units appear in your demat account statement, along with your equity share holdings, if any.

The units that you may have bought earlier through distributors will continue to figure in the statement of account (SoA) or what’s popularly known as the physical form. That way, you get two statements, which some investors may find cumbersome to manage.

Balasubramaniam says BSE is working with two of India’s largest registrars, Computer Age Management Services Ltd and Karvy Computershare, to offer the SoA way of holding units even if they are bought on the exchange as this will allow more investors to participate. “We expect this system to be ready in about four months," he says.

For now, BSE’s MF platform gives MF penetration another shot in its arm. However, with just 65 distributors registered on it, we will have to wait and see how this tribe of distributors grows.

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