SEBI Update – Measures to address regulatory arbitrage with respect to Offshore Derivative Instruments (ODIs) and FPIs with segregated portfolios vis-à-vis FPIs

SEBI vide circular  has issued measures to address regulatory arbitrage with respect to Offshore Derivative Instruments(ODIs)and FPIs with segregated portfolios. It has been decided to modify certain requirements related to ODIs and FPIs with segregated portfolios. In view of the same, the FPI Master Circular stands modified as follows:

Conditions for issuance of ODIs:

1. A Foreign Portfolio Investor shall issue ODIs only through a separate dedicated FPI registration with no proprietary investments. Such FPI registration shall be in the name of the FPI with “ODI” as suffix under the same PAN. Where such addition is being requested for an existing FPI, this addition of suffix will not be considered a change in name of FPI.
2. A Foreign Portfolio Investor shall not issue ODIs with derivatives as reference/underlying.
3. A Foreign Portfolio Investor shall not hedge their ODIs with derivative positions on Stock Exchanges in India. Accordingly, ODIs shall only have securities (other than derivatives) as underlying and shall be fully hedged with the same securities on a one-to-one basis, throughout the tenure of the ODI.

Link – https://www.sebi.gov.in/legal/circulars/dec-2024/measures-to-address-regulatory-arbitrage-with-respect-to-offshore-derivative-instruments-odis-and-fpis-with-segregated-portfolios-vis-vis-fpis_89986.html