You can soon click to buy, sell MF units

Bhave Takes The Lead To Set Up MF Trading Platform For Investors Reena Zachariah & Nishanth Vasudevan MUMBAI  SEBI chairman CB Bhave, who played a key role in revolutionising stock trading in the country more than a decade ago as the head of National Securities Depository (NSDL), may be about to trigger another one. This time, in mutual fund (MF) investing. Come March, investors can directly buy or redeem units at the click of a button, bypassing intermediaries.      The National Stock Exchange (NSE), which pioneered electronic trading in India, and NSDL will together develop a trading platform where MF units could be bought or sold back to funds without an intermediary. To avoid a monopoly, the Association of Mutual Funds in India has also chosen Central Depository Services, a BSE sibling, and registrars CAMS-Karvy to develop a similar platform.      Both these fund exchanges may begin trading by March, said two people familiar with the development.      "An online platform will be a big relief for part-time investors like me, because my distributor does not seem to be interested at all in selling MF schemes,'' said Royston Varghese, a Mumbaibased marketing executive. "Earlier, he used to send his executive to my place to collect the application and cheques. But, not anymore."      Mr Bhave is pushing for investor benefits in MF investments by abolishing the so-called entry load, which was slicing away as much as 2.5% of capital even before investors gained a penny. So, the intermediaries are not eager to sell MF units causing hardship to investors and funds as well. The MF industry, which had been reluctant to change the way of operations because of cosy relationships with intermediaries despite goading by past regulators, is moving after having been pushed to the wall.      The proposed structure will be something like share trading on portals such assharekhan.com or icicidirect.com where investors buy or sell shares without even talking to their brokers, but are charged brokerages as low as 5 paise a transaction. The shares are either credited or debited at the depository account with either NSDL or CDSL.  EASE @ TRADE  Investor-Friendly  Sebi plans to set up a trading platform where MF units can be bought or sold back to funds without an intermediary  Industry players said the move may bring down overall costs, and thus benefit all stakeholders  Work Wise  Investors can go through broking houses where they have to pay a fee, or directly log on to the websites of these two MF exchanges and transact for free  Roadblocks Ahead  Some distributors feel the platform should be accessible only to distributors, and not investors directly Fund distributors oppose direct access to investors  SIMILARLY, an investor can go through brokerages where they have to pay a fee, or directly get on to the websites of these two MF exchanges and transact for free. Whether they would be separate companies or will be part of the functioning exchanges is not known yet.      "This platform will change the way MFs are bought and sold in India," said Jaideep Bhattacharya, CMO of UTI Mutual Fund and chairman of the committee on Common Industry Platform. "The platform is expected to reduce overall costs which will be beneficial to all stakeholders," he said.      While MFs were paying commissions to distributors to sell their products, investors were paying for it indirectly in the form of entry load, which reduced returns. Mr Bhave and his predecessor M Damodaran have been critical of the industry's practices, which thrived more out of distributors, corporate money and not spreading the investment culture among retail investors.      A similar situation had prevailed in share trading before the advent of NSE. Brokers used to charge as much as 3% as brokerage or even more for equity transactions. Investors used to struggle with the transfer of physical shares to their names, and at times, were saddled with even fake share certificates. All these were eliminated with electronic trading and the depository services.      As in the case of BSE brokers, once averse to electronic trading, distributors are resisting the thought of investors having direct access without their financial advice.      "This platform should be accessible only to distributors and not to investors directly, just like on stock exchange an investor can't trade directly but has to go through a broker," says Rajiv Deep Bajaj, vice-chairman and managing director at Delhibased Bajaj Capital, a major distributor of financial products. "Investors need the help and assistance of an advisor continuously, it will be detrimental to the interest of an investor without the help of a qualified professional advisor," he added.      Whether the product succeeds or not, investors seem to be hoping to be delivered from intermediaries.      "Once the online platform comes, I hope it will reduce my dependence on my distributor,'' said Mr Varghese. Exclusive club