Sebi rolls out swing pricing to protect debt mutual fund investors

Mechanism will kick in at times of market dislocation

The Securities and Exchange Board of India (Sebi) has introduced the concept of ‘swing pricing’ to protect investors in debt mutual funds (MFs) in the event of a market dislocation or large redemptions.

In a circular issued on Wednesday, the regulator said initially the mechanism will be made applicable only during net outflows. This framework shall be applicable with effect from March 1, 2022.

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.

At times, a fund house is forced to liquidate their good quality papers to