The Securities and Exchange Board of India has extended the implementation timeline for its framework on tightening rules for offshore derivative instruments issued by foreign portfolio investors to Nov. 17.
Initially set to take effect on May 17, the framework requires additional disclosures from ODI subscribers and FPIs with segregated portfolios. This move provides more time for compliance with the new regulations.
"Based on representations received from market participants and in order to ensure smooth implementation of the said circular (issued in December), it has been decided to extend the timeline, ...to November 17, 2025," SEBI said in a circular.
The circular proposed to prohibit FPIs from issuing ODIs with derivatives as the underlying or using derivatives to hedge their ODIs in India. This was aimed at addressing regulatory arbitrage for ODIs and FPIs with segregated portfolios.
Further, FPIs cannot hedge ODIs with derivatives on Indian stock exchanges. ODIs must only reference securities (non-derivatives) and must be fully hedged one-to-one with the same securities.
On separate registration for ODIs, SEBI had stated that FPIs issuing ODIs must have a separate, dedicated registration. This registration will have the suffix “ODI” under the same PAN.
For existing FPIs, adding the suffix would not be treated as a name change and a separate registration would not be required for ODIs with government securities as the underlying.
SEBI mandated that ODI subscribers disclose detailed ownership information, up to the level of natural persons, if they meet either of the following criteria: their equity ODI positions account for 50% or more of securities linked to a single Indian corporate group, or their total equity positions in Indian markets exceed Rs 25,000 crore.
This includes ODI positions taken through one or multiple FPIs, holdings of entities with common ownership or control, and equity holdings as a registered FPI.
Certain entities such as government and government-related investors registered under FPI regulations, Public Retail Funds (PRFs), subject to validation and Exchange Traded Funds (ETFs) with less than 50% exposure to Indian equity markets are exempt from these disclosure.
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