MANU/SDER/0006/2017

Ministry : Securities and Exchange Board of India

Department/Board : Commodity Derivatives Market Regulation Department

Circular No. : SEBI/HO/CDMRD/DMP/CIR/P/2017/61

Date : 21.06.2017

Notification/ Circulars Referred : Notification No. FEMA. 355/2015- RB dated November 16, 2015 MANU/RFEM/0031/2015

Citing Reference:
Notification No. FEMA. 355/2015- RB dated November 16, 2015 MANU/RFEM/0031/2015  Referred

To,

All Commodity Derivatives Exchanges,
All Custodians of Securities,
All Alternative Investment Fund (AIFs)

Dear Sir / Madam,

Participation of Category III Alternative Investment Funds (AIFs) in the commodity derivatives market

1. At present, institutional participants are not allowed to participate in the commodity derivatives market in India. Consequently the commodity derivatives markets in India lack the desired liquidity and depth for efficient price discovery and price risk management. In the past, various committees including those constituted by the Government of India have recommended participation of institutional investors in the commodity derivatives markets, for improving the quality of price discovery, thereby leading to better price risk management.

2. Taking cognizance of the fact that participation by Institutional investors would be conducive for the overall development of the commodity derivatives market, SEBI has held consultations with various stakeholders of this market. Further, based on the recommendations of the Commodity Derivatives Advisory Committee (CDAC) and feedback received from the market participants during the consultative process, it is now decided to allow the Category-III Alternative Investment Funds (AIFs) to participate in the commodity derivatives market, subject to the following conditions:

2.1. Category III AIFs may participate in all commodity derivatives products that are being traded on the commodity derivatives exchanges as 'clients' and shall be subjected to all the rules, regulations and instructions, position limit norms as may be applicable to clients, issued by SEBI and Exchanges from time to time.

2.2. Category III AIFs shall invest not more ........