“A Foreign Portfolio Investor shall not issue ODIs with derivatives as reference/underlying. A Foreign Portfolio Investor shall not hedge their ODIs with derivative positions on Stock Exchanges in India. Accordingly, ODIs shall only have securities (other than derivatives) as underlying and shall be fully hedged with the same securities on a one-to-one basis, throughout the tenure of the ODI,” a Sebi circular issued on Tuesday said.
Conditions for issuance of ODIs
A Foreign Portfolio Investor can issue ODIs only through a separate dedicated FPI registration with no proprietary investments. Such FPI registration will have to be in the name of the FPI with ‘ODI’ as a suffix under the same PAN.
Where such addition is being requested for an existing FPI, this addition of suffix will not be considered a change in name of FPI, the circular said, adding that Designated Depository Participants (DDPs) may process the request in these cases and issue a new FPI registration certificate.
The requirement of separate dedicated registration shall not apply for issuance of ODIs with Government securities as reference/underlying.
The measures come with a view to address regulatory arbitrage with respect to ODIs and FPIs with segregated portfolios vis-à-vis FPIs.Sebi has also mandated additional disclosures by all entities holding any ownership, economic interest, or exercising control in the ODI subscriber.According to the circular, this applies to ODI subscribers who fulfil the following criteria:
a) ODI subscriber having more than 50% of its equity ODI positions through the ODI issuing FPI in ODIs referenced to securities of a single Indian corporate group.
b) ODI subscribers having equity positions worth more than Rs 25,000 crore in the Indian markets.
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