New FPI settlement mechanism to boost efficiency: Sebi

Securities and Exchange Board of India's ( Sebi) new settlement mechanism for foreign portfolio investors (FPIs) could led to efficiency gains of around Rs 2,000 crore per annum, according to the estimates of the market regulator.

Under the new system in place since September 9, 2024, tax certificates for FPI sale trades executed on ‘T’ day are issued by tax consultants by 9 am India time on ‘T+1’ day.

In a move to enhance operational efficiency and respond to concerns raised by the FPIs, Sebi introduced measures to speed up the availability of sale proceeds for FPIs, bringing them on par with domestic institutional investors.

FPIs previously reported delays in their access to sale proceeds beyond the standard ‘T+1’ settlement date. These delays were primarily due to the erstwhile process adopted for obtaining tax clearance on their net sale proceeds, to ensure compliance with FEMA Regulations.

With a view to address this issue, Sebi engaged in consultations with key stakeholders, including FPIs, clearing corporations, custodians, and tax consultants. This collaborative effort led to significant process improvements, making sale proceeds available to FPIs on settlement day.

On Tuesday, the capital market regulator raised the position limits for trading members in index Futures & Options contracts to 15% of the total open interest (OI) in the market or above Rs 7,500 crore.

The position limits are governed under Sebi's Master Circular on Stock Exchanges and Clearing Corporations (SECC), dated October 16, 2023, which specifies the overall position limit at the Trading member (TM) level (proprietary + client) to be higher of Rs 500 crores or 15% of the total Open Interest (OI) in market.

The position limits for trading members will be cumulatively for client and proprietary trades and the position limits will be applicable for index futures and index options separately as per the current practice, a Sebi circular released on Tuesday, said.

While the open interest of both the participants and the market is dynamic and changing throughout the day, equity derivatives segment i.e. index and stocks will also be monitored based on total open interest of the market at the end of previous day’s trade, the Sebi circular further stated.