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The Securities and Exchange Board of India permits recognized stock exchanges in International Financial Services Centres to deal in derivatives on equity shares of a company incorporated in India. Recognized stock exchanges operating in International Financial Services Centres obtain prior approval from the Securities and Exchange Board of India before permitting dealing in these derivatives. Eligible participants include registered Foreign Portfolio Investors operating in International Financial Services Centres and eligible entities incorporated and operating there. The Market Wide Position Limit for derivatives on equity shares equals ten percent of free-float holding. The Market Wide Position Limit in International Financial Services Centres is reckoned separately and does not exceed fifty percent of the domestic market limit in value terms.
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CIRCULAR
SEBI/HO/MRD/DRMNP/CIR/P/2017/31
April 13, 2017
All recognized Stock Exchanges and Clearing Corporations in International Financial Services Centres
Dear Sir/Madam
Inclusion of “Derivatives on Equity shares” - IFSC
Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015 were notified by SEBI on March 27, 2015, which came into force on April 01, 2015.
Clause 7 of SEBI (IFSC) Guidelines, 2015 specifies the types of securities in which dealing may be permitted by stock exchanges operating in IFSC. Based on the recommendations of the Risk Management Review Committee of SEBI, it has been decided to specify “Derivatives on equity shares of a company incorporated in India” (hereinafter referred to as ‘Derivatives on equity shares’) as permissible security under sub-clause (vi) of Clause 7 of SEBI (IFSC) Guidelines, 2015. Accordingly, the recognized stock exchanges operating in IFSC may permit dealing in ‘Derivatives on equity shares’, subject to prior approval of SEBI.
SEBI registered Foreign Portfolio Investors (FPIs), operating in IFSC, in terms of SEBI Circular IMD/HO/FPIC/CIR/P/2017/003 dated January 04, 2017, and eligible entities which are incorporated and operating in IFSC shall be eligible to trade in ‘derivatives on equity shares’.
The applicable position limits for eligible participants shall be as stipulated vide SEBI circulars SMDRP/DC/CIR-10/01 dated November 02, 2001, DNPD/Cir-30-2006 dated January 20, 2006 and SEBI/HO/MRD/DP/CIR/P/2016/143 dated December 27,
The Market Wide Position Limit (MWPL) for ‘derivatives on equity shares’ shall be equal to ten percent of the number of shares held by non-promoters in the relevant underlying security (i.e. free-float holding). Further, the MWPL for ‘derivatives on equity shares’ in recognized stock exchanges in IFSC shall be reckoned separately from that in recognized stock exchanges in domestic market and the MWPL (in value terms), in no circumstances, shall exceed the fifty percent of the MWPL (in value terms) in recognized stock exchanges in domestic market.
This circular is being issued in exercise of 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.
Yours faithfully
(Sanjay Purao)
Deputy General Manager
Division of Risk Management and New Products
Market Regulation Department
Email: sanjayp@sebi.gov.in
