SEBI allows foreign portfolio investors to invest in commodity derivatives market

The Securities and Exchange Board of India (SEBI) has given the go-ahead for foreign portfolio investors (FPIs) to participate in the commodity derivatives market.

SEBI said FPIs will be allowed to participate in the commodity derivatives market subject to certain risk management measures.

FPIs can trade in select non-agri benchmark indices but are allowed to trade in all non-agri commodity derivatives.

The position limits for FPIs, other than individuals, family offices and corporate bodies, will be at par with those presently applicable for mutual fund schemes. FPIs belonging to categories — individuals, family offices and corporates — will be allowed position limit of 20 percent of the client level position limit in a particular commodity derivatives contract that they wish to trade in.

Further, a working group comprising representatives from SEBI and market participants has been constituted to examine whether any additional risk management measures are required to be prescribed for FPIs.

This move by SEBI will increase volumes in commodity derivatives market, help in better price discovery and increase the depth of the Indian commodity market.