Circular, CIR/MRD/DP/15/2014,
dated 15th May, 2014
Risk management
framework for Foreign Portfolio Investors (FPI) under the SEBI (Foreign
Portfolio Investors) Regulations, 2014
1. The SEBI (Foreign Portfolio
Investors) Regulations, 2014 were notified on January 07, 2014 and shall
commence with effect from June 01, 2014.
2. To effect a smooth transition to
the FPI regime, stock exchanges and clearing corporations are directed to take
following measures with regard to trading and risk management of FPI trades:
2.1. Margining of trades undertaken
by FPIs in the Cash Market:
(i) The trades of FPIs in Category
I, II & III shall be margined on a T+1 basis in accordance with SEBI
circular MRD/DoP/SE/Cir-18/2008 dated May 22, 2008.
(ii) However, the trades of FPIs who
are Corporate bodies, Individuals or Family offices shall be margined on an
upfront basis as per the extant margining framework for the non-institutional
trades.
2.2. Position limit of an FPI in the
Equity Derivatives Segment and for Interest Rate Futures: Category I & II
FPIs shall have position limits as presently available to FIIs. Category III
FPIs shall have position limits as applicable to the clients.
2.3. Facility for allocation of
trades: In modification to the SEBI circular MRD/DoP/SE/Cir-35/2004 dated
October 26, 2004, the following framework shall be implemented to facilitate
allocation of trades of a FPI to other FPIs:
(i) Entities who trade on behalf of
FPIs shall inform the stock brokers of the details of FPIs on whose behalf the
trades would be undertaken.
(ii) The stock broker, in turn, shall
inform the stock exchanges the details of such related FPIs.
(iii) Stock exchanges shall put-in
place suitable mechanism to ensure that allocation of trade by a FPI is
permitted only within such related FPIs.
3. Custodians / DDPs shall provide
necessary details related to FPIs, including categorisation of FPIs, to the
stock exchanges for the purpose of implementing the aforementioned provisions.
4. Stock Exchanges and Clearing
Corporations may specify additional requirements as they may deem fit with
regard to transition from FII to FPI regime.
5. Stock Exchanges and Clearing
Corporations are directed to:
a) take necessary steps to put in
place systems for implementation of the circular, including necessary
amendments to the relevant bye-laws, rules and regulations.
b) bring the provisions of this
circular to the notice of the stock brokers / clearing members and also
disseminate the same on its website;
c) communicate to SEBI the status
of implementation of the provisions of this circular.
6. This circular is being issued in
exercise of powers conferred under Section 11 (1) of the Securities and
Exchange Board of India Act, 1992 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities
market.
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