SEBI proposes easing norms for NRIs in FnO segment, suggests using PAN as unique identifier

SEBI has also proposed doing away with the restriction that NRIs associate only with one clearing member.

The market regulator has proposed an ease-of-doing business measure to help non-resident Indians (NRIs) trading in derivatives market.

In a consultation paper released on December 10, the Securities and Exchange Board of India (SEBI) has suggested that the requirements of NRIs having a custodial participant (CP) code for trading in the F&O segment and to have to deal with only one clearing member (CM) be done away with. According to the paper, clearing corporations (CCs) could monitor NRIs' position limits using the PAN number as the CCs monitor client-level positions.

Public comments need to be sent in by December 31.

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As of now, an NRI who wants to trade in derivatives needs to obtain a CP Code from the clearing corporation through a CM. Also, the NRI is allowed to deal with only one CM.

These have been put in place to monitor position limits of NRIs effectively. SEBI has position limits and monitoring of position limits for allowing NRIs to trade in exchange traded derivatives contracts.

But PAN now being introduced as a unique identifier in the securities market and used for monitoring client level positions, it could also be used for monitoring the position limits of NRIs, according to the consultation paper.

The paper said, "CCs may monitor position limits of NRIs using PAN in the same manner as is already being done for monitoring client level positions. Accordingly, no separate CP Code would be required, if PAN is used for this purpose."

The paper added that, to bring ease of investment for NRIs to trade in derivatives and simplify procedure of monitoring NRI position limits, it is proposed to issue a circular on “Operational Efficiency in Monitoring of NRI Position Limits in Exchange Traded Derivatives Contracts - Ease of Doing Investment” to remove the requirement for NRIs to have a CP Code and deal with only one CM.

The paper suggests that the circular on the  operational modalities of monitoring of NRI position limits be modified to the following:

“The Clearing Corporation shall monitor the NRI position limits in the manner similar to the client level position limits monitored by them. Position limits for NRIs shall be same as the client level position limits specified by SEBI from time to time.

With respect to the FPI position limits, the same shall be monitored by the Exchange."