The markets regulator Sebi has extended the deadline for the adoption of a swing pricing mechanism for mutual fund (MF) schemes to May 1 in order to deter large investors from making unexpected withdrawals.

The new framework, which was set to take effect on March 1, was designed to ensure that new, outgoing, and existing participants in mutual fund schemes were treated fairly, especially during market downturns. According to a circular issued by Sebi, the implementation date of the terms of the swing pricing mechanism has been extended to May 1, 2022, based on a request by Amfi.

In September of last year, the regulator implemented a swing pricing mechanism for open-ended debt mutual fund schemes in an attempt to deter major investors from making unexpected redemptions.

For the time being, the swing pricing framework will only be used for circumstances involving net outflows from the schemes.For high-risk open-ended loan schemes, the mechanism will be a hybrid framework with a partial swing during normal periods and a necessary complete swing at market dislocation times.

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