Blitz Bureau
NEW DELHI: Market regulator Securities and Exchange Board of India (Sebi) has proposed widening foreign investors’ access to non-agricultural commodity derivatives by allowing them to trade in physically settled contracts, shows a proposal paper on Sebi website.
Overseas investors are not at present permitted to participate in contracts linked to crude oil, natural gas, gold or silver that are settled by actual delivery of the underlying goods.
According to Sebi, broader foreign participation would deepen liquidity, improve price discovery and better align India’s commodity derivatives market with global counterparts.
Sebi has proposed that foreign investors would need to square-off or roll-over positions at least three days before contract expiry. Any positions left open would be automatically transferred to designated trading members, preventing overseas investors from entering the delivery process.
Foreign investors already participate in physically settled commodity derivatives in major markets including China, Japan, the United States and Europe, making India one of the major outlier markets.
India’s restriction on foreign participation stems largely from operational constraints. Foreign investors cannot typically take or deliver commodities in India and need to obtain Goods and Services Tax (GST) registration to buy or sell commodities in the country, the regulator said.
As a workaround, Sebi has proposed that foreign investors would need to square-off or roll-over positions at least three days before contract expiry. Any positions left open would be automatically transferred to designated trading members, preventing overseas investors from entering the delivery process.
After receiving comments, Sebi normally announces final rules within about three months.
