Motilal Oswal AMC suspends ETF unit creation in two schemes

Motilal Oswal Asset Management Company (AMC) on Tuesday announced that it has temporarily suspended creation of exchange-traded fund (ETF) units directly with the fund house for Motilal Oswal Nasdaq 100 ETF and Motilal Oswal Q 50 ETF with effect from January 18.

Applications for creation of said ETF units received by the mutual fund (MF) from any investor, including large investors other than 'authorised participants’ (AP), post the cut-off timing of January 17, 2022, shall not be accepted and processed.

“We wish to highlight that suspension is not applicable to the redemption applications received by MF from any investors, including large investors or authorised participants’ in 'creation unit' size under the aforesaid schemes,” said fund house in its note to investors.

However, ETF units continue to trade on the BSE and the NSE and investors may buy or sell ETF units on the stock exchanges. The fund house in its note also added that to provide liquidity on the exchange, authorised participants are exempted from the said suspension.

 

However, there may be impact on liquidity on the stock exchanges and trading prices may deviate from its indicative real-time net asset value.

“Investors should take precaution while buying or selling ETF units on exchange. You may give ‘limit orders’ where buying or selling price is explicitly mentioned by the investors,” said the fund house.  

In ETFs, many times if large investors want to trade in multiples of creation unit size, thet can also buy or sell ETF units from AP or AMC, instead of the stock exchange.  

Last week, the fund house had temporarily halted lump-sum subscription and switch-ins under Motilal Oswal S&P 500 Index Fund, Motilal Oswal MSCI EAFE Top 100 Select Index Fund and Motilal Oswal Nasdaq 100 Fund of Fund, to manage overseas investment limits.

The steps taken by the fund house in the last few days is because its international investments are believed to have reached the market regulator's overall $ 1 billion investment limit in foreign stocks.