SEBI Allows FPIs To Participate In Exchange-Traded Commodity Derivatives Market
Moneylife Digital Team 29 June 2022
Market regulator Securities and Exchange Board of India (SEBI) on Wednesday allowed foreign portfolio investors (FPIs) to participate in the exchange-traded commodity derivatives (ETCDs) market. Under the mutual fund (MF) regulations, the SEBI board also removed the applicability of the definition of 'associate' to such sponsors who invest in various companies on behalf of the beneficiaries of insurance policies. 
 
In a release, SEBI says, "FPIs will be allowed to trade in all non-agricultural commodity derivatives and select non-agricultural benchmark indices and to begin with, they will be allowed only in cash-settled contracts."
 
The market regulator says that the existing eligible foreign entity 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, it added. 
 
FPIs will be allowed to participate in Indian ETCDs, subject to certain risk management measures, and lays down the position limits for FPI participation. SEBI expects the involvement of FPIs in ETCDs will enhance liquidity and market depth and promote efficient price discovery.  
 
SEBI has already allowed institutional investors such as category III alternate investment funds (AIFs), portfolio management services (PMS) and mutual funds (MFs) to participate in ETCDs. The effective date for allowing FPIs in the ETCD market will be notified vide a circular, the market regulator says.
 
Further, to align the provisions of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 with those of the RBI Central Counter Party Directions, 2018, the markets regulator has amended the SECC Regulations to add provisions relating to limited purpose clearing corporation (LPCC) for clearing and settlement of corporate bond repo transactions.
 
To enhance prudential norms for investments by portfolio managers, including investments in associates and related parties, the SEBI board also approved amendments to the SEBI (Portfolio Managers) Regulations, 2020.
 
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