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Wednesday, August 05, 2009

Top institutions in fray for MF trading, distribution platform

Action is building up in the mutual fund distribution arena, with four large institutions submitting their bids for setting up the Sebi-proposed trading and distribution platform. Such a facility will enable investors to transact mutual fund units like the way they transact shares.

The National Stock Exchange, National Securities Depository (NSDL), Central Depository Services (CDSL) and the CAMS-Karvy consortium (registrar and transfer agents) have submitted their proposals to build the Amfi platform, ET has learnt from an official familiar with the development.

Amfi will select the best bidder and forward the proposal to Sebi for final clearance. While it is quite natural for CAMS-Karvy to jointly bid for the platform because of their status as top registrars for Indian MFs, the decision of NSDL, CDSL and NSE to enter the fray is surprising, say industry watchers. It is not yet clear as to who will fund the project.

"Amfi is yet to come clear on the funding part. In all likelihood, the institution that builds and operates the platform will be remunerated by charging transaction fees from platform users. This could be one aspect that is prompting institutions to bid for the trading platform," an industry source said.

The platform is being set up after Sebi directed Amfi to develop 'free and impartial' trading and distribution alternatives. The idea, according to sources, is to empanel all the 38 fund houses under one roof. The platform will allow investors to buy/redeem schemes, compare fund performance and receive portfolio statements (funds of different fund houses comprise a portfolio) through a single online window.

"Amfi had asked us to give a proposal in this regard; only key market players (with good business network and non-alliance to mutual fund business) have been invited to bid for the project. We've been asked to submit a proposal on broad parameters such as cost of constructing the platform, technology, platform capacity, project completion time and chargeable fees (for using the platform)," said a senior official at one of the bidders.

The need for an online platform has grown after Sebi scrapped the entry-load system and imposed restrictions on mutual fund houses reimbursing distributors through funds collected from investors. These steps are expected to affect the finances of MFs, as they will have to reimburse distributors from their own pockets.

Against this backdrop, the industry been forced to take up initiatives to cut costs that are deemed high. A shift to online platform, which will be similar to that of stock trading account, will reduce overheads incurred on printing applications, performance statements and postage.


source: ET

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