PTI New Delhi

Markets regulator Sebi on Monday proposed a change in cut-off timings to determine the net asset value (NAV) with respect to repurchase or redemptions of units in overnight schemes of mutual funds from 3 pm to 7 pm.

The proposed change, if implemented, will allow time for stock brokers (SBs), or clearing members (CMs) to un-pledge units of Mutual Fund Overnight Schemes (MFOS) and place redemption requests with mutual funds, after the close of market hours, Sebi said in its consultation paper.

Investment in MFOS is a new avenue made available to stock brokers or clearing members to deploy client funds and ensures minimal risk transformation of client funds because of overnight tenure and exposure to only risk-free government securities. SBs/CMs ensure that client funds are invested only in such MFOS that deploy funds into risk-free government bond overnight repo markets and overnight Tri-party Repo Dealing and Settlement (TREPS).

Further, such MFOS units are required to be in demat form, and must necessarily be pledged with a clearing corporation at all times.