BSE mutual fund platform still leaves cost issue open

The Bombay Stock Exchange today launched its mutual fund trading platform, ‘BSE StAR MF’, but there is no clarity yet on the cost structure

Following closely on the heels of its rival, the National Stock Exchange (NSE), the BSE has inaugurated ‘BSE StAR MF’, its independent mutual-fund trading platform. More than 20 fund houses have already confirmed their participation in this venture. While schemes from seven-eight fund houses will be available for trading immediately, others are expected to start trading in the next few days. These fund houses are also expected to join hands with NSE for its trading platform.

Both the Central Depository Services Ltd (CDSL) and National Securities Depository Ltd (NSDL) have confirmed their participation as depositories for the new venture. NSDL has initially decided to waive all trading charges on the BSE platform. Karvy and CAMS will provide Registrar and Transfer Agent (R&TA) services.

Although investors now have the added benefit of being able to access their neighbourhood broker for buying, selling and redeeming mutual fund units, a lot of ambiguity still prevails on the cost of trading on this new platform. Industry experts claim broker charges will be on par with normal commission on equities, i.e., around 0.50% of the transaction value. Moneylife had earlier pointed out the possibility of investors actually ending up shelling out more through the broker route than if they approached a mutual fund distributor. However, Deena Mehta, managing director of Asit C Mehta Investment Intermediates, claims otherwise. “We will only charge brokerage at 0.50% for every transaction”, said Mrs Mehta, adding that no additional charges will be levied.

Commenting at the launch, Madhu Kannan, MD & CEO, BSE, said, “Mutual funds have become an essential vehicle for investors to channelize their savings. Given the breadth of our nationwide network, we are positive that investors will find value in this platform. The BSE’s new StAR platform will offer a low-cost inclusive network to all mutual funds and intermediaries in the mutual fund industry.”

BSE’s mutual fund platform, which is more of an order-routing mechanism, will take advantage of over 40,000 terminals spread across India to extend services to mutual fund investors.

Brokers are anticipating good volumes, even from retail investors. An official from a leading fund house, who did not wish to be named, said, “Initially, the response may not be huge, but we do believe that, eventually, investors will come in large numbers as certain modalities are ironed out and things become clearer.”

Describing the difference between the two rival platforms of BSE and NSE, Mrs Mehta said, “The BSE platform is mainly browser-based, providing access anywhere, while the NSE operates on the NEAT system, a dedicated point-to-point connectivity-based system.”

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