Sebi allows direct market access to registered FPIs for participating in ETCDs

In order to promote institutional participation in Exchange Traded Commodity Derivatives, Sebi Wednesday allowed stock exchanges to extend direct market access to registered FPIs with immediate effect

Livemint
Updated10 May 2023, 07:41 PM IST
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In September 2022, Sebi allowed FPIs to participate in the ETCDs in order to increase depth and liquidity in the market
In September 2022, Sebi allowed FPIs to participate in the ETCDs in order to increase depth and liquidity in the market

In order to promote institutional participation in Exchange Traded Commodity Derivatives (ETCDs), market regulator Securities and Exchange Board of India (Sebi) Wednesday allowed stock exchanges to extend direct market access to registered Foreign Portfolio  Investors (FPIs) with immediate effect. 

Direct Market Access (DMA) facilitates the clients of a broker to directly access the exchange trading system through the broker's infrastructure to place orders without manual intervention by the broker.

Also, DMA provides certain advantages to brokers such as direct control over orders, faster execution of orders, reduced risk of errors associated with manual order entry, maintaining confidentiality, lower impact costs for large orders and implementing better hedging and arbitrage strategies.

"Based on representations received for enabling DMA facility to FPIs in ETCDs and deliberations by Commodity Derivatives Advisory Committee (CDAC) of Sebi, it has been decided to allow stock exchanges to extend DMA facility to FPIs for participation in ETCDs," the market regulator said.

This permission is subject to certain conditions that require brokers to follow procedure for application for DMA, operational specifications, client authorisation, and broker-client agreement, risk management, among others.

“The provisions of circular issued on September 29, 2022 allowing FPIs to participate in ETCDs shall remain applicable”, the Sebi added.

In September 2022, Sebi allowed FPIs to participate in the ETCDs in order to increase depth and liquidity in the market. To begin with, the regulator permitted FPIs to participate in cash settled non-agricultural commodity derivative contracts and indices comprising such non-agricultural commodities.

The regulator had already allowed institutional investors such as Category III Alternative Investment Funds (AIFs), Portfolio Management Services and Mutual Funds to participate in the ETCD market.

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$13 B

26%

4.47 M

70%

₹70,936 Cr

$13 B

26%

4.47 M

70%

18

₹70,936 Cr

58

100

$81 M

₹3,000 Cr

₹15,399 Cr

₹1.28 T

4,275 Kms

First Published:10 May 2023, 07:41 PM IST
HomeMarketsStock MarketsSebi allows direct market access to registered FPIs for participating in ETCDs

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