Everything you need to know about Liquidbees and Liquid Exchange Traded Funds (ETFs)

#1

What is a Liquid ETF/Liqudbees and how does it work?
Liquid ETF or a Liquid Exchange Traded Fund (ETF) is designed to provide you a low-risk return and high liquidity. It trades on the exchanges (NSE and BSE) just like a stock.

How does a LiqudETF/LiquidBees work?
The way this instrument works is actually quite interesting. The price of the ETF stays constant at Rs 1000 and the returns you earn are daily dividends in the form of units which are again re-invested in the ETF. These units (your returns) are credited to your demat once every 30 days.

Just to reiterate - the dividends are calculated daily, reinvested, and credited once a month to your demat account.

What’s the difference between Liqudbees and a LiqudETF?
Reliance Mutual Fund owns and operates Liqudbees and it is the symbol of their Liquid ETF. Given that it was the only liquid ETF in India up until recently, LIQUDBEES became synonymous with liquid ETFs.

There are 3 Liquid ETFs available currently and they all work the same way:

LIQUDBEES - is issued and administered by Reliance Mutual Fund.
LIQUIDETF - is issued and administered by DSP Mutual Fund.
ICICILQ - is issued and administered by ICICI Mutual Fund.

How can I buy a Liquid ETF/Liqudbees?
A Liquid ETF trades on the stock exchanges just like a stock. You can login to your trading account, search for “LIQUID” and you’ll see two ETFs - LIQUIDBEES by Reliance and LIQUIDETF by DSP.
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What’s the settlement cycle for Liquid ETFs?
Same as stocks i.e. T+2.

What can I use Liquid ETFs for?
Liquid ETFs are actually a convenient avenue to park surplus funds in your account. You can pledge them anytime and take a trade immediately.

How does the pledging of Liquid ETFs work?
Liquid ETFs are marginable securities. Assuming that you are waiting for a trade and have parked funds in a Liquid ETF, what you can do is pledge them back with your broker and use the margin to take a trade. You don’t even have to sell them and this makes them an extremely convenient tool for cash management.

How much margin do I get for pledging Liquid ETFs/Liqudbees?
The collateral margin received from Liquid ETFs are considered as cash equivalent by the exchanges.
Meaning, if you pledge 1 lakh worth of Liqudbees, you get a collateral margin of 90 thousand that you can use to take trades. You can only use the collateral margin only for F&O trades.
10% is the haircut, which is to account for any adverse movements in the underlying.

How much have Liquid ETFs returned historically?

Here’s a screenshot depicting the returns:

The screenshot says 6% odd but why are my actual returns around 3.5%?
Good question. Since the returns in Liquid ETFs are in form of dividends they are subject to a Dividend Distribution Tax of 28.84 %. This means that the returns from Liquid ETFs are tax-free.

You can check out the dividend calculator to calculate your effective returns.

I have received dividends but I don’t see them in my holdings?
Fractional units aren’t shown in your holdings, they will only be shown once your units aggregate to 1. Meaning, only whole units are shown in your holdings.

Until then, you can register on CDSL easi and check your holdings statement.

In that case, how can I sell my fractional units?
Process largely remains the same, but here’s the process for Reliance Liqudbees.

Do dividends accrue on weekends?
Yes, they do.

What securities do Liquid ETFs invest in and are they safe?
Liquid ETFs invest in Tri-Party REPO, Repo, Government Securities, Reverse Repos, and other similar overnight instruments. Liquid ETFs have so far stuck to overnight lending which as risk-free as it can be. About 99% of their allocation is towards tri-part repo which is fully collateralized. Meaning, assume that some borrows from an AMC defaults, since the money is fully collateralized, there is no default risk.

Also, since they only hold overnight securities, the interest rate risk also as good as zero.

What are the charges applicable for buying selling these ETFs?
At Zerodha the brokerage for delivery is 0 and STT isn’t applicable but all other charges are applicable.
A DP charge of Rs 8 will be applicable on selling.

Can I trade intrady in Liqquid ETFs?
Yes, you can but you won’t earn anything and your broker will be very thankful to you. :slight_smile:

I’d highly recommend watching this videos which explain how these ETFs work what kind of securities these ETFs invest in.

6 Likes
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Liquidbees close at 1000 always?
Margin against Fixed Deposit and MF
Can someone explain how exactly Liquid Bees works?
#3

Nicely explained, thank you bhuvanesh

#5

@Bhuvanesh ,Thanks a lot sir .

Sir ,I understand that …I get 90% margin Benefit from my liquidbees pledge . But I would like to know …what are the charges that I born from my side for Everytime I pledge with ZERODHA.
Thanks in advance .

#6

I wanted to know that if there’s any risk involved with liquidbees only because of ADAG pack. I’m not talking about any other risk only ADAG?

#7

LiquidBees is mainly used for cash management purposes and hence cannot afford to take risk. It doesn’t lend directly to companies. It largely invests only in Tri-party repo, which is fully collateralized.

If you are interested in understanding more about Tri-party repo (TREPS) then you can watch this webinar:

#9

Are there dividend calculators for these two Liquid ETFs? I do see dividend calculator for Liquidbees though.
Also, is there any comparison between the performance of the three liquid ETFs?

#10

How do we calculate the points/time period to break even here? I keep a certain amount of money parked in LiquidETF for a week or month, and after selling them, would I be making any net profit with dividends earned considering DP and other transaction costs?

#11
  • Can we pledge liquidbees or other liquidETF for MIS trades in equity and commodity segment?
  • And in CDS?
#12

Sir I just wanted to know if there is any risk involved because of the AMC?

#13

Can you elaborate, what exactly do you mean?

#14

I mean sir this ETF is managed by Reliance Mutual Fund which comes under ADAG (Anil Dhirubhai Ambani Group) so if there any issue comes in this group then is there any risk involved like today RCOMM filed bankruptcy that’s why i’m asking?

#16

AMCs are highly regulated entities and with tonnes of disclosures. Reliance Mutual Fund is one of the biggest AMC in India. Your money is as safe as it can be, rest assured.

1 Like
#17

Each AMC should have it’s own.

The return profile should be almost the same with a few bps difference. Check the factsheets to compare the returns.

#18

Okay Thanks for clarifying sir.

#19

from historical chart of liquidbees one can find the etf trading at low of 950 and high 1014.but, How come liquidbees always open and close at 1000? Shouldn’t it behave like another etf ? i am confused here , if someone can enlighten it would be great.

for how much time a pledge of liquidbees applicable. is it till one unpledge it?

Rs 60 pledge for liquidbees. is it valid for the single script?
suppose if i pledge 100 units today and 100 tomorrow of same script. will i be charged 120 or it will remain 60 because i pledged the same script before?

#20

Hello Divesh:

Liquidbees primarily invest in Tri Party Collateralized Repo money market instruments. The returns generated is distributed to the investors as Units which are reinvested in the scheme. So you will see your total number of Units growing with every passing month.

Rs 60 will be charged for one pledge instance, it does not matter if you pledge 1 Unit or 1000 Units.

#21

What are monthly returns per 1000 on LiquidBees and DSP Liquid ETF? Also are these two the only liquid ETF’s?

#22

Answered above!

#23

List of Liquid ETF that is available

#24

Thanks for providing me and some other with this topic, I just looked for such information everwhere in the web and do come out with that stuff really no matter how you put it - Liquidbees and Liquid Exchange Traded Funds (ETFs) do needed.