MARKETS regulator Sebi on Wednesday came out with operating norms for silver exchange traded fund (ETF), a move that will make it convenient for investors to have an exposure to such commodity in a transparent manner. Under the norms, the regulator has specified guidelines on investment objectives of silver ETFs, valuation, determination of net asset value (NAV), tracking error as well as tracking difference and disclosure requirements. Currently, Indian mutual funds are allowed to launch ETFs tracking gold. In a circular, Sebi said silver ETFs will have to invest at least 95 per cent of net asset in silver and silver-related instrument. Further, Exchange Traded Commodity Derivatives (ETCDs) having silver as the underlying will be considered as silver-related instrument for silver ETFs. Investment in ETCDs having silver as the underlying by silver ETFs will be subject to certain conditions.

 

The exposure to ETCDs having silver as the underlying will not exceed 10 per cent of net asset value of the scheme. However, this limit will not be applicable to silver ETFs where the intention is to take delivery of the physical silver and not to roll over its position to next contract cycle. “Before investing in ETCDs having silver as the underlying, mutual funds shall put in place a written policy with regard to such investment with due approval from the board of AMC and trustees,” Sebi said. The policy will be reviewed by the board of asset management company (AMC) and trustees at least once a year.

 

The cumulative gross exposure of silver ETFs will not exceed 100 per cent of the net assets of the scheme. According to Sebi, the physical silver will be of standard 30 kg bars with fineness of 99.9 per cent purity conforming to London Bullion Market Association (LBMA) Good Delivery Standard. “With Sebi laying regulations for silver ETFs, it will become very convenient for investors to have exposure to silver as a commodity in a transparent manner, in addition to their exposure to gold,” Hemen Bhatia, Deputy Head - ETF, Nippon Life India Asset Management Ltd, said. The NAV of silver ETFs will be disclosed on daily basis on website of the AMC. Further, the NAVs will be disclosed on stock exchange where the units of these ETFs are listed, on continuous basis during trading hours.