Mumbai: Rooting for transparency, capital markets regulator Sebi will tweak regulatory norms pertaining to Exchange-Traded Funds (ETFs) if necessary, according to its chairman U K Sinha.
An ETF is a marketable security that tracks an index, a commodity, bond, or a basket of assets like an index fund.
“Based on inputs from cross-section of experts or participants, if there is any need that further changes are required for rules and regulations of the ETFs, Sebi will be more than willing to listen to you and incorporate them,” said Sinha adding that more disclosures with regard to ETFs were required to benefit investors.
Speaking to media on the sidelines of NSE’s ‘India ETF Conference 2015’ here on Monday, he said, “If we are able to avoid those risks, make proper disclosures, are able to communicate properly then ETF has a very good chance of growing in India.”
He, however, cautioned that further product innovation should be dealt with carefully to avoid investor and market risks.
On the possibility of introducing ETF based on commodities following the FMC merger with Sebi, he said, introduction of new players and products would happen after a few months. “We first have to be fully satisfied that all regulations and safeguards are in place,” he said.
According to Sinha, the primary reason for having an ETF is liquidity, but one has to guard against whether the liquidity is available at the time of stress or not. “In case, there’s a crisis and people get perception that there are serious risks it could effect the product. There could also be situation that underlying is actually not liquid, while the ETF is liquid, such things should also be avoided,” said Sinha.
He said, EPFO investment in equities through ETF route for the first time will help market growth. “Recently, the exchange has commenced launch of products in government securities and gilt space and there are significant work in the background, which will help us look at products and launch products in the commodity space in the ETF category in the next few months to come,” said Chitra Ramkrishna, MD & CEO, NSE.
According to her, assets under management for the ETF sector has the potential to grow to `1 lakh crore, while plans are afoot to bring broader indices in the next five years.
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