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110. What steps did SEBI take in order to introduce Derivative instruments in the field of Mutual Funds?
Ans: SEBI has permitted Mutual Funds to use derivatives trading subject to the following restrictions.
- Mutual Fund can enter into derivatives transaction in a recognized stock exchange for the purpose of hedging and portfolio balancing.
- Exposure , if any, of more than 10% of the net assets of any scheme of a Mutual Fund investing in derivative products shall be disclosed.
In the first round , SEBI allowed only 50% of the Fund to be invested in derivatives , and in the second round of Derivatives and Arbitrage Funds, SEBI allowed MFs to invest 100% of the schemes's Fund in stock and index derivatives , allowing MFs to invest 100% of the schemes' Fund in stock and index derivatives , allowing MFs to launch Arbitrage and Derivative Funds.