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But investors should look at other online options before taking this route

Last week, the BSE introduced switch facility and SIP/XSIP registrations on both demat and non-demat modes on its StAR MF platform. In addition, SIP/XSIP registrations with direct pay-out of units will be offered in the demat mode. XSIP or Exchange SIP is a facility offered to member brokers and mutual fund distributors to register their client’s electronic clearing services bank mandates.

Until now, only the National Stock Exchange offered the facility to buy and sell MF units without a demat account through MF Simplified, a platform started a few months ago. “The BSE is trying to replicate what NSE has done with its MF Simplified platform,” said Manoj Nagpal, chief executive officer, Outlook Asia Capital. The Securities and Exchange Board of India did away with the need to use a demat account to buy and sell mutual funds on the exchanges in December last year.

So far, exchange platforms have not been popular among investors, as they did not allow them to switch in and switch out of schemes, do SIPs or execute non-commercial transactions. Units purchased took a day or two to get credited into investors’ accounts. To redeem units, clients had to sign the demat slip and give it to the depository. The depository, in turn, had to send the request to the fund house, which gave it to the registrar and transfer agent (RTA). Distributors, too, were not keen to use the platform because of the ambiguity surrounding trail commissions.

MF Simplified and the upgraded BSE StAR MF platform addresses these issues. Transaction is faster than the earlier mode; the transaction is completely paperless and investors can get an aggregate portfolio feed. No demat account means investors no longer have to bear costs associated with maintaining one.

Experts believe the ease of transaction and better facilities will bring more MF investors on the exchange platforms in the next one year. Notably, the number of MF orders on both the exchanges — BSE STAR MF and NSE MFSS — has more than doubled to 1.9 million in 2014-15, compared with 819,000 the previous year.

The platforms will offer another alternative to those keen on transacting online. Today, investors can buy and sell schemes on the respective websites of the mutual fund houses by filling their user name and a password or a personal identification number (PIN) to transact. These websites, however, do not give an aggregate portfolio feed.

The option is online transaction portals such as Fundsindia.com and Fundsupermart.com, which do away with the need to remember individual passwords or PINs. These portals usually do not charge customers. Then, there are online brokerages such as ICICIdirect.com and banks, which require investors to open online investment accounts by paying a nominal fee to do their MF transactions.

However, a few glitches remain with the exchange platforms. For instance, on MF Simplified, investors have to remember different 10-digit login numbers, depending on the mode of holding. Also, only 17 fund houses have so far signed up with MF Simplified. MF Utility, a centralised distribution platform, might become a bigger draw in the future. The biggest advantage of MF Utility is that unlike the exchange platform, it offers both direct and regular plans.

Here is how the BSE’s STAR platform will work in the non-demat mode. First-time investors have to do their know-your-customer (KYC) and register with the distributor, who will load and scan the KYC into the system. This will be forwarded by the exchange to the RTA, which will create a folio. The client can then put a purchase order through the client login. He can transfer the funds through the NEFT or IMPS to the exchange/clearing corporation. Accordingly, the units will be issued.

For redemption, the investor has to put the redemption order. The exchange will forward the request to the RTA, which will credit the amount to the bank account of the investor, according to the net asset value of day.