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Sebi Eyes Wider FPI Entry in Commodity Derivatives
11 Aug
Summary
- FPIs may soon trade non-agricultural index and physically settled commodity derivatives.
- Proposed safeguards include mandatory position squaring-off before tender period.
- Sebi seeks public comments on widened FPI participation by September 1.
The Securities and Exchange Board of India (Sebi) has put forth proposals to significantly broaden the participation of foreign portfolio investors (FPIs) in the country's exchange-traded commodity derivatives (ETCDs). The proposed changes would permit FPIs to engage in trading non-agricultural index derivatives, irrespective of their settlement method, and also in non-cash-settled, or physically settled, non-agricultural commodity derivatives.
These measures aim to enhance market liquidity, improve price discovery, and better integrate India's commodity derivatives market with global benchmarks. To address potential delivery challenges for FPIs who cannot directly take or make physical delivery in India, Sebi has proposed safeguards. These include a mandatory requirement for FPIs to square off or roll over their positions three days before the expiry.
Further, a two-tier safeguard mechanism is suggested, involving tripartite or bipartite agreements to manage involuntary transfers of positions. This system aims to protect FPIs from delivery obligations. Sebi is currently seeking public comments on these proposals, with a deadline of September 1.
