Online MF trading starts today with UTI schemes

Investors keen on buying mutual funds online through the National Stock Exchange (NSE) will need to wait slightly longer to get access to all fund houses. The NSE’s online MF trading platform will only start with equity funds of one Asset Management Company.

NSE’s Mutual Fund Service System (MFSS), starting on Monday, will only have equity schemes, 93 of these, from UTI Mutual Fund. “This is a pilot project. The rest of the fund houses will join later,” said a source from the MF industry. He said Birla Sun Life MF will be the second to join the platform.

Fund houses are in the process of creating technology infrastructure to list their schemes on the stock exchange. Some of the late entrants said they preferred to wait and watch how the pilot pans out.

And, it’s not just fund houses. Even brokers are yet to finalise plans before they go live with MFSS. Brokers said there are a lot of issues they need to settle. “Many are still grappling with the charges. They are debating if brokerage should be charged or the buying and selling should be free,” said a broker.

Maju Nair, head of distribution at ShareKhan, pointed out issues pertaining to technology. “A broker will need to develop the entire front-end for this,” said Nair. This calls for upgrading the systems to be able to provide consolidated portfolio reports, designing the interface that suits clients, and other value additions.

Nair feels it will take at least three to six months for the platform to stabilise and a customer to find any value in it. “When a similar structure was discussed two years back, brokers were unwilling to implement it. Their individual research showed there weren’t enough customers who invest in both stocks as well as in mutual funds,” Nair said.

When fully functional, MFSS will allow investors to buy and sell MFs online from 9 am to 3 pm. Currently, brokers who take MF investment requests online have a cutoff time of 1 pm. This is because they need to update requests with the Registrar.

This platform will also allow investors to hold their MF units in electronic form in their demat account, just like shares. Those who want their advisor to get the commission from the fund house will need to fill a form that enables such service and give it to the respective broker.