Sebi weighs allowing FPIs into bullion derivatives

Subscribe to enjoy similar stories.MUMBAI: In a move aimed at deepening India’s commodity derivatives market, the Securities and Exchange Board of India (Sebi) is holding early-stage discussions with market infrastructure institutions to allow foreign portfolio investors to trade bullion derivatives without participating in physical settlement, according to two people familiar with the matter.Foreign portfolio investors (FPIs) are currently allowed to trade only in non-agri commodity derivatives that are cash settled, such as crude oil and natural gas contracts. Sebi had opened up that segment to foreign investors in June 2022.

Bullion, base metals and agri derivatives, however, are compulsorily deliverable upon contract expiry."Sebi is considering allowing foreign investors to rollover an expiring contract to the next contract to participate across the bullion derivatives suite (include futures and options). This would enable their participation without physical settlement,” said one of the two people mentioned above.The discussions, ongoing for the last four months, have centred on allowing FPIs to rollover or square off positions before contracts enter the delivery period, the people said.

Sebi has not taken a final decision yet.For instance, gold futures on the Multi Commodity Exchange of India (MCX) are bi-monthly contracts that normally expire on the fifth day of an expiry month. The tender period, during which outstanding buy-sell positions result in delivery, usually starts on the first day of the expiry month and continues till expiry.The proposal seeks to ensure FPIs exit or roll over positions before entering the delivery cycle.