Framework for Corporate Debt Market Development Fund (CDMDF)
Summary
This circular establishes the regulatory framework for the Corporate Debt Market Development Fund (CDMDF) to act as a backstop facility during market stress. It mandates compliance with the Ministry of Finance's Guarantee Scheme and outlines specific operational guidelines for asset management, pricing, and disclosure. The document further details fair pricing approaches in Annexure A and loss waterfall accounting structures in Annexure B. This section defines the loss absorption hierarchy for CDMDF, prioritizing Class A3 units followed by Class A1 and A2 units. It mandates specific accounting procedures for apportioning profits and losses among unit classes during market dislocation periods. The text includes detailed scenarios illustrating how Net Asset Values are calculated and adjusted under various gain and loss conditions. The document details scenarios 7 through 11, illustrating the impact of market value and realized gains or losses on unit class Net Asset Values. It specifies that for significant losses causing NAVs to drop below opening levels, manual intervention is required to adjust values between unit classes. The text outlines a waterfall mechanism where Class A3 abs
Text
Chapter III-C has been inserted vide amendments to SEBI (Alternative Investment Funds) Regulations, 2012... in order to facilitate constitution of an Alternative Investment Fund namely, Corporate Debt Market Development Fund (“CDMDF” or “the Fund”), to act as a Backstop Facility for purchase of investment grade corporate debt securities...
CDMDF shall comply with the Guarantee Scheme for Corporate Debt (GSCD) as notified by Ministry of Finance vide notification no. G.S.R. 559(E) dated July 26, 2023...
The fund shall deal only in following securities during normal times: Low duration Government Securities, Treasury bills, Tri-party Repo on G-sec, Guaranteed corporate bond repo with maturity not exceeding 7 days.
During Normal times: (0.15% + tax) of the Portfolio Value charged on daily pro-rata basis. During Market stress: (0.20% + tax) of the Portfolio Value charged on daily pro-rata basis.
Corporate debt securities to be bought by CDMDF during market dislocation include listed money market instruments. The long term rating of issuers shall be considered... if there is no long term rating available... the most conservative long term rating shall be taken...
CDMDF shall follow the Fair Pricing document as placed at Annexure A while purchase of corporate debt securities during market dislocation.
CDMDF shall follow the loss waterfall accounting, as prescribed at Annexure B.
CDMDF shall disclose Net Asset Value (NAV) of the fund by 9:30 PM on all business days on website of its Investment Manager and AMFI. For times when CDMDF would have exposure to corporate debt, such NAV shall be disclosed by 11 PM on all business days.
AMFI shall specify the detailed guidelines for purchase of securities by CDMDF in consultation with SEBI. Stock exchanges shall provide a separate window on the existing Request for Quote (RFQ) platform... within 3 months of issuance of this circular. Clearing Corporations shall provide required infrastructure... within 3 months...
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulations 77 of SEBI (Mutual Funds) Regulations, 1996...
Valuation policies prescribed for Mutual Funds... Previous day’s valuation of securities by valuation agencies... Average 10 days valuation prior to start of market dislocation. Mark-up in yield over previous day may be limited to arrive at floor price...
The investment policy shall be duly approved & reviewed periodically by the Board of Trustee, Investment Committee & Governance Committee.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Framework for Corporate Debt Market Development Fund (CDMDF). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.