Jan 11, 2019

The Securities and Exchange Board of India (SEBI) on January 10, 2019 has issued Portfolio Concentration Norms for Equity Exchange Traded Funds (ETFs) and Index Funds.

·         The norms are as under:

(a)    The index shall have a minimum of 10 stocks as its constituents.

(b)   For a sectoral/ thematic Index, no single stock shall have more than 35% weight in the index. For other than sectoral/ thematic indices, no single stock shall have more than 25% weight in the index.

(c)    The weightage of the top three constituents of the index, cumulatively shall not be more than 65% of the Index.

(d)   The individual constituent of the index shall have a trading frequency greater than or equal to 80% and an average impact cost of 1% or less over previous six months.

      Accordingly, any ETF/ Index Fund that seeks to replicate a particular Index shall ensure that such index complies with the aforesaid norms.

·         Compliance Procedure:

a.       The norms shall be applicable to all ETFs/ Index Funds tracking equity indices.

b.      The ETF/ Index Fund issuer shall evaluate and ensure compliance to the aforesaid norms for all its ETFs/ Index Funds at the end of every calendar quarter.

c.       The ETF/Index Fund issuer shall ensure that the updated constituents of the Indices (for all its ETFs/ Index Funds) are available on the website of such ETF/Index Fund issuers at all points of time.

·         Applicability:

a.       All existing Equity ETFs/ Index Funds in the market: The issuers of all the existing Equity ETFs/ Index Funds are required to ensure adherence to the new norms by all the ETFs/ Index Funds within a period of three months from the date of issuance of this circular.

b.      All the Equity ETFs/ Index Funds where SEBI has issued final observations on the Scheme Information Document, but have not yet been launched: The issuers shall submit the compliance status vis-à-vis these norms to SEBI before launching such ETFs/ Index Funds.

[Circular No. SEBI/HO/IMD/DF3/CIR/P/2019/011]

URL: https://www.sebi.gov.in/legal/circulars/jan-2019/portfolio-concentration-norms-for-equity-exchange-traded-funds-etfs-and-index-funds_41588.html


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