Securities and Alternate Board of India (SEBI India) proposed offshore derivatives on Tuesday (ODI) issued by offshore funds needs to be backed solely by money fairness or debt positions and never by derivatives.
It additionally advisable that ODI traders ought to make extra disclosures if greater than half of the funds in ODI devices are deployed in Indian conglomerates.
ODI is an instrument that enables international traders to put money into Indian securities with out registering in India.
ODI’s derivatives positions in Indian markets added to market volatility, sources mentioned. An e-mail question despatched to SEBI for remark didn’t elicit a direct response. India has been tightening laws Derivatives trading, governments raised taxes on such transactions and regulators moved to curb retail exercise, warning of wider dangers. SEBI now needs to cease offshore funds from establishing derivatives positions by opaque constructions, the primary supply mentioned.
In accordance with SEBI, 4 offshore funds with ODIs maintain lengthy positions in Indian securities futures price Rs 3,075 crore (about $366 million).
If the suggestions are applied, the plans would should be concluded inside a yr.
SEBI’s incapability to know ODI’s leverage in abroad markets poses a regulatory problem, a second supply mentioned.
“Subsequently, India has proposed an entire ban on derivatives positions (by ODI). SEBI hopes that ODI can solely be hedged by the money market to keep away from unknown and opaque leverage,” the individual mentioned.
ODI invested Rs 1.34 trillion (roughly $16 billion) in India, accounting for almost 2% of whole international funding.
A yr in the past, SEBI requested offshore funds holding concentrated stakes in Indian conglomerates to disclose details about the top traders.
Whereas these norms apply to ODI, SEBI faces resistance from giant ODI holders as they don’t seem to be explicitly talked about, the primary supply mentioned.
