The capital markets regulator Securities Exchange Board of India (Sebi) has announced via circular to launch on Thursday a corporate debt market development fund (CDMDF).
Sebi released a framework for this fund stating that this fund will comply with the guarantee scheme for corporate debt as notified by the finance ministry.
The circular states that corporate debt securities to be brought during market dislocation include listed money market instruments.
These are some of the instruments the fund will deal in during normal time.
Key constituents:
1. Low duration government securities
2. Treasury bills
3. Tri-party repo on G-Sec
4. Guaranteed corporate bond repo with maturity not exceeding 7 days.
The fund will be launched as a close-ended scheme with an initial tenure of 15 years (extendable) from the date of its initial closing date.
The Sebi also mentioned in the circular that the units of this fund will be subscribed by AMCs of mutual fund and specified debt-oriented mutual fund schemes.
The specified debt-oriented mutual funds schemes will invest 25 basis points of their assets under management in the units of CDMDF.
The markets regulator also prescribed the fees and expenses of the fund which will be as follows:
Fees and expenses:
A. During normal times: 0.15% + tax of the portfolio value charged on daily pro-rata basis.
B. During market stress: 0.20% + tax of the portfolio value charged on daily pro-rata basis.
The CDMDF will follow the fair pricing document while purchase of corporate debt securities during market dislocation, states the Sebi circular.
In a circular issued on Thursday, Sebi stated that this fund is constituted for purchase of investment grade securities to instil confidence amongst the participants in the corporate debt market during times of stress and to generally enhance secondary market liquidity by creating a permanent institutional framework for activation in times of market stress.
