Sebi board approves FPI play in non-agri commodity derivatives, expands scope of PMS

Market regulator Sebi has approved foreign portfolio investor participation in select non-agricultural commodity futures and options, a move aimed at deepening institutional participation in India’s commodity derivatives market.

The decision was part of a wider set of board approvals that also included an overhaul of portfolio manager regulations, a revamp of settlement proceedings rules, easier call record maintenance norms for research entities, a common advertisement code for certain regulated entities and expanded vault manager norms beyond electronic gold receipts.

The approval on FPI participation is important for India’s non-agricultural commodity derivatives market, which includes contracts linked to commodities such as bullion, energy and base metal.


Until now, FPI participation in the commodity derivatives segment was limited. FPIs could trade cash-settled non-agricultural commodity contracts and indices comprising such commodities. However, contracts involving delivery raised operational and tax issues because FPIs generally do not have a permanent establishment in India.

The new framework allows FPIs to participate in non-cash-settled non-agricultural commodity derivatives, but with a clear delivery firewall.

The board also approved an overhaul of portfolio manager regulations. The changes are expected to give the PMS industry more flexibility and widen the range of products that portfolio managers can offer.

Sebi had earlier proposed changes including a new mutual fund-only PMS category, investment flexibility in pre-IPO securities and unlisted debt for discretionary PMS, and overseas investment flexibility for portfolio managers.

The regulator also approved an overhaul of settlement proceedings regulations. The review is expected to simplify the settlement framework and make settlement terms more workable while retaining deterrence. Sebi had earlier proposed changes in how settlement amounts are calculated, how defaults are counted and how mitigating and aggravating factors are applied.

Research entities also got relief, with Sebi easing norms for call record maintenance. This is likely to reduce compliance burden for research analysts and other research entities while retaining audit and accountability safeguards.

The board also cleared a common advertisement code for certain Sebi-regulated entities. The proposed framework seeks to bring uniformity in advertising norms and reduce overlap across different entity-specific codes. Sebi had earlier proposed moving from prior approval to post-issue reporting in some cases, while also allowing brand-level or entity-level celebrity endorsements subject to conditions.

Another approval expands the scope of vault manager regulations beyond electronic gold receipts. This suggests Sebi is looking to widen the vaulting framework as commodity-market infrastructure evolves beyond gold-linked products.