CIRCULAR
SEBI/HO/MRD/MRD-RAC-1/P/CIR/2022/131 September 29, 2022
To
All Recognized Stock Exchanges having Commodity Derivatives Segment
All Foreign Portfolio Investors registered with SEBI
All Custodians registered with SEBI
Sir/Madam,
Sub: Participation of SEBI registered Foreign Portfolio Investors (FPIs) in
Exchange Traded Commodity Derivatives in India
1. In order to promote institutional participation in Exchange Traded Commodity
Derivatives (ETCDs), SEBI has permitted Category III Alternative Investment
Funds, Mutual Funds and Portfolio Management Services to participate in ETCDs
vide Circular No SEBI/HO/CDMRD/DMP/CIR/P/2017/61 dated June 21, 2017,
Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019 and Circular
No. SEBI/HO/IMD/DF1/CIR/P/2019/066 dated May 22, 2019, respectively.
2. In furtherance to the objective of enhancing institutional participation in ETCDs,
SEBI, vide Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2018/134 dated October
09, 2018 also permitted Eligible Foreign Entities (EFEs) having actual exposure
to Indian commodity markets, to participate in the commodity derivative segment
of recognized stock exchanges for primarily hedging their exposure.
3. Considering the non-participation by such EFEs in ETCDs in spite of more than
three years since the EFE framework came into force, based on the
representations of the market participants and recommendations of Commodity
Derivatives Advisory Committee of SEBI, it has been decided that the existing
EFE route be discontinued. Accordingly, the Circular No.
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SEBI/HO/CDMRD/DMP/CIR/P/2018/134 dated October 09, 2018 stands
repealed.
4. It has been decided to allow foreign investors to participate in Indian ETCDs
through the FPI route, subject to conditions prescribed by SEBI.
5. The participation of FPIs in Indian ETCDs would be subject to the following:
5.1 To begin with, FPIs will be allowed to participate in cash settled non-
agricultural commodity derivative contracts and indices comprising such non-
agricultural commodities.
5.2 FPIs desirous of participating in ETCDs shall be subject to risk management
measures applicable, from time to time.
5.3 Position Limits:
5.3.1 FPIs other than individuals, family offices and corporates may participate
in eligible commodity derivatives products as ‘Clients’ and shall be subject
to all rules, regulations and instructions, position limit norms as may be
applicable to clients, issued by SEBI and stock exchanges, from time to
time.
5.3.2 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 derivative contract.
5.4 The participation of FPIs including individuals, family offices and corporates
shall be subject to compliance with the provisions of SEBI (Foreign Portfolio
Investors) Regulations, 2019, SEBI (Custodian) Regulations, 1996 and other
applicable SEBI circulars on ETCDs.
5.5 Stock Exchanges/Clearing Corporations may specify additional
safeguards/conditions, as deemed fit, to manage risk and ensure orderly
trading in ETCDs.
6. The provisions of this circular shall come into immediate effect.
7. This circular is issued with the approval of competent authority.
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8. The stock exchanges are advised to:
8.1 Take steps to make necessary amendments to the relevant bye-laws, rules
and regulations for the implementation of this circular,
8.2 Bring the provisions of this circular to the notice of the members of the stock
exchange and also disseminate the same on their website.
8.3 Communicate to SEBI, the status of implementation of the provisions of this
circular.
9. This circular is issued in exercise of the powers conferred under Section 11(1)
of the Securities and Exchange Board of India Act, 1992 to protect the interests
of investors in securities and to promote the development of, and to regulate
the securities market.
10. The circular is available on SEBI website at www.sebi.gov.in under the category
“Circulars” and “Info for - Commodity Derivatives”.
Yours faithfully,
Sandeep Kriplani
General Manager
Market Regulation Department
Tel No. +91-22-2644 9265
Email: sandeepk@sebi.gov.in
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