The Securities and Exchange Board of India has released a risk management framework for foreign portfolio investor mandating a stricter margin requirement for companies, individuals and family.
The foreign portfolio investor regime will be effective from Jun 1. Under the risk management framework detailed today, the capital market regulator said trades of Foreign Portfolio Investor under category I, II and III shall be margined on a T+1 (trade plus one) basis while those by portfolio investor which are corporate bodies, individuals or family offices shall be margined on an upfront basis.
Trades of Foreign Portfolio Investor under category I, II and III shall be margined on a T+1 basis
The category I of Foreign Portfolio Investor includes government and government related investors such as central banks, governmental agencies, sovereign wealth funds and international or multilateral organizations or agencies.
Category II comprises of regulated broad based funds such as mutual funds, investment trusts, banks, insurance companies and asset management companies while the Category III covers the rest such as endowments, charitable societies, charitable trusts, foundations, corporate bodies, trusts, individuals and family offices.
SEBI has also stated that Foreign Portfolio Investor in Category I and II shall have position limits same as those currently available to Foreign Institutional Investors in the equity derivatives and interest rate futures segments.
The regulator also said that entities which trade on behalf of foreign portfolio investors shall inform stock brokers of the details of these clients. The stockbroker in turn shall also inform the stock exchanges of the details related to foreign portfolio investors.
The capital markets regulator has also asked custodians or depositories to provide necessary details related to portfolio investor including categorisation to the stock exchanges in order to facilitate the implementation of the provisions.