3 weeks ago

Sebi proposes wider FPI access to non-agri commodity derivatives

Sebi proposes wider FPI access to non-agri commodity derivatives
Sebi proposes allowing FPIs to trade physical-settled non-agri derivatives · thehansindia.com

India has special markets where people trade things like oil, gold and metal rather than company shares, and these are called commodity markets.

Today, investors from other countries can only trade a few of these products, like oil and gas, and only in a way that avoids taking physical goods.

India's market regulator, called Sebi, wants to let these foreign investors trade many more of these products, including contracts where real goods would normally be delivered.

There is one big problem: foreign investors are not registered for India's goods and services tax, so they cannot take delivery of actual goods from exchange warehouses.

Sebi has come up with a rule to solve this.

Investors would have to close or roll over their trades a few days before contracts end.

If they don't, the trade automatically moves to a broker, so foreign investors never have to take physical goods.

Sebi says the change should bring in more institutions, better prices and stronger links between derivatives and physical markets.

Sebi is asking the public for opinions until 1 September before making a final decision.

Key facts

Regulator
Securities and Exchange Board of India (Sebi)
Current FPI access
Cash-settled non-agri commodity derivatives only, since June 2022
Proposed access
Physically settled non-agri commodity derivatives and non-agri index derivatives
Examples of current contracts
Crude oil and natural gas
Expiry rule
Square off or roll over positions starting from T-3, three days before the tender period
Fallback mechanism
Automatic transfer of open positions to a designated trading member (TM) or trading-cum-clearing member (TCM)
Risk compensation
Pre-agreed 'Proprietary Risk Absorption Charge' payable by the FPI
Public comment deadline
1 September

Quotes

Sebi

Securities and Exchange Board of India, India’s securities market regulator

“"FPIs should be allowed to participate in non-agricultural index derivatives contracts," the regulator said in its consultation paper.”
thehansindia.com

Sources

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