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Execution-only platform (EOP)

ByULF TEAM

Jun 15, 2023 #Economy
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Recently, the Securities and Exchange Board of India (SEBI) issued a circular, creating a new category of intermediaries called execution-only platforms (EOPs).

About Execution only platform (EOP)

  • It is a digital or online platform which facilitates transactions such as subscription, redemption and switch transactions in direct plans of schemes of mutual funds.
  • Till now, there was no specific framework available for technology/digital platforms (including platforms provided by Investment Advisers/Stock Brokers to non-clients) to provide execution-only services in direct plans of mutual fund schemes.
  • As per the new SEBI’s new guidelines, no entity would be allowed to operate as an EOP without obtaining registration from SEBI or the Association of Mutual Funds in India (AMFI).
  • Categories of EOP: The capital markets regulator has divided EOPs into two categories.
    • Category 1 EOPs: These would need to be registered with AMFI, the mutual fund industry body.
    • Under this category, the EOPs would act as an agent of asset management companies (AMCs) and integrate their systems with AMCs and/or Registrar and Transfer Agents (RTAs) authorized by AMCs to facilitate transactions in mutual funds.
    • These entities may act as an aggregator of the transactions in direct plans of schemes of mutual funds and provide services to investors or other intermediaries.
    • Category 2 EOPs: These would need to be registered as a stock broker with SEBI and can operate as an agent of investors and operate only through the platforms provided by the stock exchanges.

What is Mutual Fund?

  • It is a pool of money managed by a professional Fund Manager.
  • It is a trust that collects money from a number of investors who share a common investment objective and invests the same in equities, bonds, money market instruments and/or other securities.

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