FPI gets direct market access facility, SEBI issues circular

SEBI has now given direct market access to FPIs. Now FPIs will be able to trade in ETCDs. SEBI said in its circular that this permission has been implemented with immediate effect. SEBI has made FINNET 2.0 module mandatory in the next circular.

May 10, 2023 - 20:49
FPI gets direct market access facility, SEBI issues circular

Capital market regulator SEBI today allowed direct market access to foreign portfolio investors (FPIs). Now FPIs will be able to trade in Exchange Traded Commodity Derivatives (ETCDs) from Indian stock exchanges. SEBI issued a circular saying that this new provision will come into force with immediate effect.
Direct Market Access (DMA) facilitates the clients of a broker to access the exchange trading system directly through the infrastructure of the broker to place orders without manual intervention by the broker.
In addition, DMA provides brokers with certain benefits such as direct control over orders, faster order execution, less risk of errors associated with manual order entry, maintaining confidentiality, lower impact costs for large orders, and better hedging and arbitrage strategies. A facility-like implementation is available.
SEBI has given this permission to these FPIs subject to certain conditions which require the broker to follow the procedure for applying for DMA, operational specifications, client authorization, broker-client agreement, risk management, etc.
In September 2022, SEBI allowed FPIs to participate in ETCDs to increase liquidity in the market. Initially, the regulator allowed FPIs to enter into cash-settled non-agriculture derivative contracts and participate in such non-agriculture indices. The regulator had already allowed institutional investors like Category III Alternative Investment Funds (AIFs), portfolio management services, and mutual funds to participate in the ETCDs market.
SEBI, in a separate circular, has come out with a circular mandatorily enrolling all debenture trustees registered in the FINNET 1.0 system of the Financial Intelligence Unit - India (FIU-India) in the FINNET 2.0 module.
FINNET 2.0 module aims to provide quality financial information to protect the financial system from misuse by money laundering, terrorism financing, and other economic crimes.

Muskan Kumawat Journalist & Writer