Sebi allows FPIs to participate in Exchange-Traded Commodity Derivatives Market
Securities and Exchange Board of India
Markets regulator Securities and Exchange Board of India (SEBI) on Wednesday allowed foreign portfolio investors to participate in the Exchange-Traded Commodity Derivatives Market.
In the statement issued today after a meeting of the SEBI director board, the regulator said, "The Board, after deliberations, approved the participation of Foreign Portfolio Investors (FPIs) in Exchange Traded Commodity Derivatives (ETCDs)."
Salient features for participation of FPIs in ETCDs:
The existing Eligible Foreign Entity (EFE) route, which required actual exposure to Indian physical commodities, has been discontinued. Any foreign investor desirous of participating in Indian ETCDs with or without actual exposure to Indian physical commodities, can do so through the FPI route.
FPIs will be allowed to trade in all non-agricultural commodity derivatives and select non-agricultural benchmark indices. To begin with, FPIs will be allowed only in cash-settled contracts.
FPIs will be allowed to participate in Indian ETCDs, subject to certain risk management measures.
The position limits for participation of FPIs in ETCDs are as under:
(i) The position limits for FPIs (other than individuals, family offices and corporate bodies) will be at par with those presently applicable for Mutual Fund schemes, i.e., as a client.
(ii) FPIs belonging to categories viz. individuals, family offices and corporates will be allowed position limit of 20 per cent of the client level position limit in a particular commodity derivatives contract, similar to the position limits prescribed for currency derivatives.
(iii) A Working Group comprising of representatives from SEBI and market participants has also been constituted to review/examine whether any additional risk management measures are required to be prescribed for FPIs.
The participation of FPIs in ETCDs is expected to enhance liquidity and market depth as well as promote efficient price discovery. SEBI has already allowed institutional investors such as Category III AIFs, Portfolio Management Services and Mutual Funds to participate in ETCDs.
The regulator in its release said that the effective date will be notified vide a Circular.