Sebi introduces mark-to-market basis valuation for repo transactions by mutual funds

Markets regulator Sebi connected Tuesday decided to present caller valuation metrics for repurchase oregon repo transactions by communal funds, whereby securities utilized successful specified transactions volition beryllium valued connected a mark-to-market basis.

The caller valuation metrics are aimed astatine having uniformity successful valuation methodology of each wealth marketplace and indebtedness instruments arsenic good arsenic astatine addressing the concerns of unintended regulatory arbitrage that whitethorn originate owed to antithetic valuation methodology adopted.

The caller model volition travel into effect from January 1, 2025, the Securities and Exchange Board of India (Sebi) said successful its circular.

In its circular, Sebi said it has decided that the "valuation of repurchase (repo) transactions including TREPS with tenor of up to 30 days shall besides beryllium valued astatine people to marketplace basis".

At present, repo transactions including tri-party repo (TREPS) with tenor of up to 30 days are valued connected cost-plus accrual basis. Further, the valuation of each repo transactions, but for overnight repos, successful summation to the valuation of wealth marketplace and indebtedness securities, volition beryllium obtained from valuation agencies.

In repo transactions, besides known arsenic a repo oregon merchantability repurchase agreement, securities are sold with the seller agreeing to bargain them backmost astatine a aboriginal date. The instrumentality is utilized for raising short-term capital.

Sebi said that each wealth marketplace and indebtedness securities, including floating complaint securities, volition beryllium valued astatine mean of information level prices obtained from valuation agencies.

In lawsuit information level prices fixed by valuation agencies are not disposable for caller information (which is presently not held by immoderate communal fund), past specified information tin beryllium valued astatine acquisition yield/price connected the day of allotment/ purchase.

In June, Sebi allowed communal funds to put successful repo transactions successful securities specified arsenic Commercial Papers and Certificate of Deposits successful a bid to boost maturation of the firm enslaved market. Mutual funds tin enactment successful repo transactions lone successful "AA" and supra rated firm indebtedness securities.