Swing pricing framework for mutual fund schemes

SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/631 · 2021-09-29 · SEBI

Summary

SEBI mandates a swing pricing framework for open-ended debt mutual fund schemes to mitigate costs from net outflows. The framework distinguishes between normal times, where implementation is optional with prescribed parameters, and market dislocation, where full swing pricing is mandatory for high-risk schemes. Specific disclosure requirements, NAV adjustment protocols, and an applicability date of March 1, 2022, are established under this circular.

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it has been decided to introduce swing pricing framework for open ended debt mutual fund schemes (except overnight funds, Gilt funds and Gilt with 10-year maturity funds).

AMFI shall prescribe broad parameters for determination of thresholds for triggering swing pricing which shall be followed by the AMCs. AMFI shall also prescribe an indicative range of swing threshold to the industry for normal times.

For normal times, AMCs shall decide on the applicability of swing pricing and the quantum of swing factor depending on scheme specific issues.

All of the above shall be disclosed by the AMC in its Scheme Information Document (SID).

AMCs may, if they desire so, implement the swing pricing framework for normal period... and the same shall be considered as a Fundamental Attribute Change of the scheme in terms of regulation 18(15A) of SEBI (Mutual Fund) Regulations, 1996.

For the purpose of determining market dislocation, AMFI shall develop a set of guidelines/parameters/model for recommending the same to SEBI. SEBI will determine ‘market dislocation’ either based on AMFI’s recommendation or suo moto.

the swing pricing framework shall be mandated only for open ended debt schemes... which: i. have High or Very High risk on the risk-o-meter... and ii. classify themselves in the cells A-III, B-II, B-III, C-I, C-II and C-III of Potential Risk Class (PRC) Matrix...

A minimum swing factor as under shall be made applicable to the schemes mentioned at para II(b) above and the NAV will be adjusted for swing factor.

All the open ended debt schemes... shall incorporate the provision pertaining to mandatory swing factor as stipulated at Table 1 above in their offer documents within a period of three months from the date of this circular and the same will not be considered as a Fundamental Attribute Change...

When swing pricing framework is triggered and swing factor is made applicable... both the incoming and outgoing investors shall get NAV adjusted for swing factor.

All AMCs shall make clear disclosures along with illustrations in the SIDs including information on how the swing pricing framework works, under which circumstances it is triggered and the effect on the NAV for incoming and outgoing investors.

Swing pricing shall be made applicable to all unitholders at PAN level with an exemption for redemptions upto Rs. 2 lacs for each mutual fund scheme for both normal times and market dislocation.

Source: SecMarx — Swing pricing framework for mutual fund schemes. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.