The Securities and Exchange Board of India (SEBI) has clarified that it has not imposed any blanket ban on the issuance of overseas derivative instruments (ODIs) by Foreign Portfolio Investors (FPIs). SEBI has denied media reports which claimed that FPIs have been prevented from issuing ODIs.
SEBI’s clarification
“FPIs are prohibited from issuing ODIs whose underlying includes derivative instruments,” SEBI said. This means that only those ODIs which are derivative based are banned. SEBI also said that issuance of ODIs based on cash market securities is fully permitted. SEBI had issued a circular in this regard on 17 December 2024.
Highlights of the circular
The SEBI circular states that:
- FPIs cannot issue ODIs whose underlying contains derivatives.
- FPIs cannot use ODIs to hedge their derivative positions on Indian stock exchanges.
- FPIs will now be permitted to issue ODIs only through a separate and dedicated FPI registration.
- In this registration, the word ‘ODI’ should be prefixed to the name of the FPI and it should be under the same PAN.
However, this rule does not apply to ODIs based on government security.
Refutation of false news
On December 18, 2024, SEBI clarified that misinformation is being spread in some sections of the media. It was being said in those reports that there has been a complete ban on issuing ODIs by FPIs. SEBI termed this as wrong and said that this ban is only on derivatives based ODIs and not on all ODIs.
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