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Participation of Eligible Foreign Entities (EFEs) in the commodity derivatives market

CIRCULAR

SEBI/HO/CDMRD/DMP/CIR/P/2018/134

October 09, 2018

To,
The Managing Directors / Chief Executive Officers
All Recognised Stock Exchanges and recognised Clearing Corporations with Commodity Derivatives Segment

Dear Sir / Madam,

Sub: Participation of Eligible Foreign Entities (EFEs) in the commodity derivatives market
1. Currently, foreign entities are not permitted to directly participate in the Indian commodity derivatives market, even if they import/export various commodities from/to India. Such entities by virtue of their actual exposure to the various commodities in Indian market, are valuable stakeholders in the value chain of such commodities, and are also exposed to price uncertainty of Indian commodity markets. Therefore these foreign entities should be enabled to hedge their price risk in the Indian commodity derivatives market.

2. Taking cognizance of the fact that participation by such foreign participants would be conducive for the overall development of the commodity derivatives market in India, SEBI issued consultation paper on May 18, 2018 to discuss the suitable framework for allowing foreign participants to hedge their commodity exposure. Pursuant to feedback received from the market participants during the consultative process, it has been decided to permit foreign entities having actual exposure to Indian commodity markets, to participate in the commodity derivative segment of recognized stock exchanges for hedging their exposure. Such foreign entities shall be known as “Eligible Foreign Entities” (EFEs). The detailed regulatory framework for participation by the EFEs have been outlined at Annexure to the circular.

3. The provisions of this circular shall come into effect from the date of the circular.

4. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

5. The Exchanges are advised to:
i. To make necessary amendments to the relevant bye-laws, rules and regulations.
ii. Bring the provisions of this circular to the notice of the stock brokers of the Exchange and also to disseminate the same on their website.
iii. Communicate to SEBI, the status of the implementation of the provisions of this circular.

6. This circular is available on SEBI website at www.sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”.

Yours faithfully,

Vikas Sukhwal
Deputy General Manager
Division of Market Policy
Commodity Derivatives Market Regulation Department
Email: vikass@sebi.gov.

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