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Sebi has determined to introduce new valuation metrics for repo transactions by mutual funds
The new framework will come into impact from January 1, 2025, the Securities and Exchange Board of India (Sebi) stated in its round.
Markets regulator Sebi on Tuesday determined to introduce new valuation metrics for repurchase or repo transactions by mutual funds, whereby securities utilized in such transactions might be valued on a mark-to-market foundation.
The new valuation metrics are aimed toward having uniformity in valuation methodology of all cash market and debt devices in addition to at addressing the issues of unintended regulatory arbitrage which will come up on account of totally different valuation methodology adopted.
The new framework will come into impact from January 1, 2025, the Securities and Exchange Board of India (Sebi) stated in its round.
In its round, Sebi stated it has determined that the “valuation of repurchase (repo) transactions together with TREPS with tenor of as much as 30 days shall even be valued at mark to market foundation”.
At current, repo transactions together with tri-party repo (TREPS) with tenor of as much as 30 days are valued on cost-plus accrual foundation. Further, the valuation of all repo transactions, aside from in a single day repos, along with the valuation of cash market and debt securities, might be obtained from valuation companies.
In repo transactions, also referred to as a repo or sale repurchase settlement, securities are offered with the vendor agreeing to purchase them again at a later date. The instrument is used for elevating short-term capital.
Sebi stated that every one cash market and debt securities, together with floating price securities, might be valued at common of safety stage costs obtained from valuation companies.
In case safety stage costs given by valuation companies are usually not out there for brand spanking new safety (which is at the moment not held by any mutual fund), then such safety will be valued at buy yield/worth on the date of allotment/ buy.
In June, Sebi allowed mutual funds to spend money on repo transactions in securities equivalent to Commercial Papers and Certificate of Deposits in a bid to spice up development of the company bond market. Mutual funds can take part in repo transactions solely in “AA” and above rated company debt securities.
(This story has not been edited by News18 workers and is printed from a syndicated information company feed – PTI)
