Sebi rolls out 'swing pricing mechanism' for open-ended debt funds; here's what it means for investors?

Capital and commodities markets regulator Securities and Exchange Board of India (Sebi) has recently decided to introduce a 'swing pricing mechanism' for open-ended debt mutual fund schemes. The new framework, to be applicable from March 1, 2022, is aimed at ensuring fairness in the treatment of entering, exiting and existing investors in mutual fund schemes, particularly during the market dislocation.

While the new norms speak of debt fund investors' interest, the term may look new to many and hence it’s important to understand the mechanism in detail.

Swing pricing generally refers to a process for adjusting a fund's net asset value (NAV) to effectively pass on transaction costs stemming from net capital activity to the investors concerned.