Sebi's Ananth Narayan says in early talks to explore netting framework for FPIs to ease portfolio rebalancing

“There are multiple things that we are looking at to see what we can do to ease operations for FPIs. More than margin, I think there is a question of whether we should allow for netting across buying and selling of different securities,” SEBI Whole-Time Member Ananth Narayan told Moneycontrol.

The Securities and Exchange Board of India (Sebi) is examining the feasibility of allowing netting of trades by foreign portfolio investors (FPIs) — a move that could make portfolio rebalancing smoother and more cost-efficient, according to people aware of the discussions.

The idea, which is still at a very preliminary stage, involves permitting FPIs to offset buy and sell positions in different securities, instead of settling each leg separately. This could be particularly useful when global funds rebalance portfolios or indices by buying one stock and selling another.

“There are multiple things that we are looking at to see what we can do to ease operations for FPIs. More than margin, I think there is a question of whether we should allow for netting across buying and selling of different securities,” Sebi Whole-Time Member Ananth Narayan told Moneycontrol.

Narayan said the proposal, if pursued, would need coordination with the Reserve Bank of India (RBI) and could entail adjustments to existing regulatory frameworks.

“It will require some changes in Sebi and RBI regulations and circulars. It also involves a certain amount of risk because there’s an intraday risk involved in clearing, since the payment has to happen before,” Narayan said, emphasising that discussions are at an early exploratory stage.

“No, these are in very early discussion stages to see whether something is possible,” he added.

He also underlined that Sebi would consult all stakeholders, including other regulators, before moving ahead.

“Obviously, we’ll have to discuss with all stakeholders, including other regulators. But there’s a whole variety of things that we are trying to do. You’ve seen the Swagat proposal, right? After that, we’re trying to see what we can do to improve ease of doing business and investment for FPIs in a manner which doesn’t increase risk in the ecosystem,” Narayan said.

The initiative, if implemented, could be another step in Sebi's ongoing efforts to enhance the ease of investing for foreign portfolio investors, following the Swagat platform introduced earlier this year to streamline registration and operational processes.