Zerodha's Nikhil Kamath reacts to SEBI's new norms for execution only platforms

Nikhil Kamath, Co-Founder at leading financial technology companies Zerodha and True Beacon on Thursday said it's too early for him to provide a definitive comment on Securities and Exchange Board of India's (SEBI's) new regulatory framework for Execution Only Platforms (EOPs). He, however, expressed his optimism and belief that these guidelines are a step in the right direction for the benefit of investors and market participants.

Kamath acknowledged that his team is still in the process of comprehending the intricacies of the new guidelines laid out by SEBI. He further conveyed his eagerness to analyze the guidelines and gain a better understanding of their implications.

“We are still trying to figure out how we will implement this," he told CNBC-TV18.

Despite not being able to comment extensively at the moment, Kamath emphasised that he perceives the new guidelines as a positive development for the industry.

One key aspect highlighted by Kamath during the interview was the fact that his company's platform exclusively offers direct plans.

Direct plans, as defined by SEBI, are investment options that allow investors to directly invest in mutual funds without involving intermediaries such as distributors or brokers. Kamath's emphasis on providing direct plans aligns with SEBI's focus on promoting transparency and investor empowerment.

On Tuesday, SEBI released a regulatory framework for Execution Only Platforms (EOPs) to facilitate transactions in direct plans of mutual fund schemes. With this, SEBI aims to addresses the lack of specific guidelines for technology and digital platforms that offer execution services for direct plans of mutual fund (MF) schemes.

SEBI has observed that several registered investment advisors and stockbrokers offer execution services in direct plans of mutual fund schemes through their technology platforms. These platforms are frequently used by investors who are not clients under the SEBI (Investment Advisers) Regulations, 2013, or the SEBI (Stock Brokers) Regulations, 1992.

"Thus, while the investors may find it convenient to avail the services of such online platforms, investors who are not clients of such intermediaries under the above specified Regulations may not have recourse or protection for the risks associated with such transactions. Therefore, a need was felt to strike a balance between investor convenience and investor protection," it said.