Trading platform for MFs gets off ground

MUMBAI: The Association of Mutual Funds in India (Amfi) has shortlisted four entities to develop a common electronic platform that will allow asset managers, investors and distributors to trade, switch over and compare schemes online through a single window.

The Amfi is likely to zero in on one entity within two weeks, following which the plan will be presented to market regulator Securities and Exchanges of India (Sebi) for final approval. Amfi intends to implement the platform by March 2010.

The need for a shared online platform for the local MF industry, a concept that has been borrowed from the developed markets, has strengthened, especially after Sebi recently scrapped the entry-load system and imposed restrictions on the industry, while doling out commissions to brokers.

These steps are expected to affect the finances of MFs, as they will have to reimburse MF distributors from their pockets. Against this backdrop, MFs have been forced to resort to every method to cut costs that are deemed high. A shift to online platform, which will be similar to that of share trading, is expected to reduce costs for the industry significantly over the next few years.

���The transaction costs for the industry could be reduced to half over the next five years,��� said Jaideep Bhattacharya, CMO of UTI MF, who is the chairman of Amfi panel for this project. Mr Bhattacharya said that the operating profit of local MF industry is 6 basis points below the global average. The operating costs are 4 basis points above the global average, he added, indicating that the scope for Indian MFs to reduce costs including shift to the online platform.

The platform will allow investors to trade open-ended schemes and track their portfolio through a single platform. Currently, only close-ended schemes can be traded among investors.