Sebi revises currency derivative norms for domestic investors, FPIs; allows to trade up to USD 5 mn

Capital markets regulator Sebi has allowed domestic and foreign portfolio investors to take positions of up to USD 5 million in currency derivatives contracts without having to establish an underlying exposure.

In a circular on Thursday, Sebi revised norms aligned with the Reserve Bank of India's (RBI) October 10 circular, which changed the threshold for taking positions in foreign exchange derivatives involving the rupee without establishing an underlying exposure.

Under the revised framework, domestic clients and foreign portfolio investors (FPIs) can take long or short positions up to a single limit of USD 5 million equivalent of notional value (outstanding at any point), across all currency pairs involving the Indian rupee, put together, and combined across all recognised stock exchanges.


The regulator has also specified that FPIs must ensure that their short positions across all contracts in foreign currency-rupee pairs do not exceed USD 5 million.

For positions above the USD 5 million threshold, FPIs taking the long positions must have an underlying exposure in Indian debt or equity securities, including units of equity and debt mutual funds, Sebi said.

Domestic clients can take positions beyond the limit subject to conditions specified by the RBI in its master direction on Risk Management and Inter-Bank Dealings dated October 10.

The Securities and Exchange Board of India (Sebi) said stock exchanges and clearing corporations must put in place systems to implement the revised provisions and make consequential amendments to their rules and regulations.