Buying and selling through stock exchanges ::Business Line

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With top fund houses offering select schemes for investments through the stock exchanges, (30 through NSE and 29 through BSE), you have an easier way to transact in mutual funds. Here's a look at what the exchanges offer.

ELECTRONIC PLATFORMS

The electronic platform offered by NSE is called Mutual Fund Service System, which is widely known as MFSS. It is an online order collection system used for purchasing and selling mutual funds from orders received from investors through the brokers.

Separately, the platform offered by Bombay Stock Exchange is called as BSE StAR MF. The platform was launched on December 4, 2009.

ADVANTAGES OF INVESTING

Saves time: With access to fund houses on the exchanges, investors needn't make time or to take the pain of going to the nearest fund house. Mutual fund transactions are only a click away.

Less paperwork: There is no major paperwork required to transact mutual funds online. All the paperwork is electronically done and they can be easily stored. The platform is very easy, convenient, and user-friendly.

No additional KYC : When investing, a single KYC can be used for investing into various types of funds from a single or different fund houses.

Easy availability of terminals: There are a large number of share trading terminals spread across the country. A person who wants to invest in mutual funds can open an account with any of the registered brokers of NSE and BSE.

Single view of portfolio: Investors can get all the relevant information pertaining to shares and mutual funds under the one platform.

Fees and charges: While the Securities and Exchange Board of India doesn't impose any regulatory restrictions on the fees charged by the trading members for MFSS services, members can charge brokerage fees from investors inclusive of service tax.

Typically, the trading member or broker doesn't charge any fees for opening a demat account with them. However, they do charge a nominal fee on a yearly basis, as account maintenance charges which vary from Rs 500-Rs 1000.

As per the new circular released by the Securities and Exchange Board of India (dated August 22, 2011), for investments more than Rs 10,000, existing investors have to shell out Rs 100 per subscription, whereas a new investor has to put in Rs 150 for investments. There would be no transaction charges below Rs 10,000. In case of Systematic Investment Plans amounting to more than Rs 10,000, the transaction charges have to be recovered in a maximum of 3-4 successful instalments.

TRANSACTION PROCEDURE

You can approach a trading member or broker of BSE or NSE with whom you have a demat account. Although a demat account is not mandatory for investing in MFs through stock exchanges, it has its own advantages.

You can submit all documents along with the payment options, and thereafter start purchasing and redeeming mutual funds. You need to open a separate bank account in order to start the transactions.

Documents required: PAN Card, KYC compliance form, address proof, proof of payment option, or payment gateway, are the common documents which are needed for carrying out transactions of mutual funds through stock exchanges.

Transaction timings: You can enter the orders from 9 am to 3 pm (both the exchanges). After, 3 pm you can get to know the status of your order, and the value at which the units of the mutual funds will get credited and debited in the account.

Challenges: Want of transparency in commission disclosure amongst brokers, and high brokerage fees that some brokers charge while opening a demat account, are hindrances here.

(The author is General Manager, Fundsupermart.com)