MCX makes another stab at getting more FPIs on board

livemint.com:

MUMBAI : India’s largest commodity derivatives exchange has opened its doors wider to foreign investors in its biggest segment, after a previous attempt to secure their interest did not take off as expected. On Saturday, the Multi-Commodity Exchange of India Ltd (MCX) allowed FPIs under the categories of individuals, family offices and corporates into oil and natural gas derivatives, which made up 77% of MCX’s March turnover.

The move, which takes immediate effect, comes at a time of increased activity in energy derivatives worldwide. Crude oil and natural gas derivatives contributed ₹20.74 trillion to MCX’s total futures and options turnover of ₹26.83 trillion in March.

MCX said FPIs will be allowed position limits of up to 20% of their client-level position limits in eligible derivative contracts and indices. Saturday’s decision follows a master circular from the Securities and Exchange Board of India (Sebi) on 4 August 2023, that laid down eligibility criteria for FPI participation in commodity derivatives.

Sebi’s master circular states that initially, FPIs can trade only in cash-settled non agricultural commodity derivatives, laying down two sub-categories—one whose position limits are equal to other client limits, and the other, which includes the three sub-categories MCX announced on Saturday with 20% of client limit. MCX has fixed the client-level position limit across crude oil futures contracts at 480,000 barrels and across natural gas contracts at 6 million mmBTU (million British thermal units).The three sub-categories of FPIs (individual , corporate and family office) will be allowed to trade 96,000 barrels and 1.2 million mmBTU.