The Securities and Exchange Board of India on 29th September 2021 has decided to introduce swing pricing framework for open ended debt mutual fund schemes (except overnight funds, Gilt funds and Gilt with 10-year maturity funds).
Swing pricing is a mechanism used to ensure that long-term investors in debt schemes are not adversely impacted during big-ticket redemptions, typically by large investors.
The swing pricing framework will be made applicable only for scenarios related to net outflows from the schemes. The framework shall be a hybrid framework with a partial swing during normal times and a mandatory full swing during market dislocation times for high risk open ended debt schemes.
For normal times, the Association of Mutual Funds in India (AMFI) has been tasked by the markets regulator to prescribe broad parameters for determining the thresholds for triggering swing pricing and shall decide on the applicability of swing pricing and the quantum of swing factor depending on scheme specific issues.
The framework will come into effect from 1st March 2022 and the AMFI shall prescribe broad parameters within a period of three months from the date of this circular.
