Participation of Mutual Funds in Commodity Derivatives Market in India
Summary
This circular permits mutual funds to participate in Exchange Traded Commodity Derivatives (ETCDs) subject to specific conditions and restrictions. It outlines eligibility criteria, investment limits, operational requirements for Asset Management Companies, and mandatory disclosure norms. The provisions are issued under Section 11(1) of the SEBI Act to regulate market participation and protect investor interests.
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In furtherance to this objective, it has been decided to permit mutual funds to participate in ETCDs.
Mutual funds are permitted to participate in ETCDs in India, except in commodity derivatives on ‘Sensitive Commodities’ as defined vide SEBI circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/84 dated July 25, 2017.
it has been decided that ETCDs having gold as the underlying, shall also be considered as ‘gold related instrument’ for Gold Exchange Traded Funds (Gold ETFs).
mutual funds shall dispose of such goods from the books of the scheme, at the earliest, not exceeding 30 days from the date of holding of the physical goods.
No mutual fund scheme shall have net short positions in ETCDs on any particular good, considering its positions in physical goods as well as ETCDs, at any point of time.
Mutual funds are permitted to participate in ETCDs through the following schemes: a) Hybrid schemes... which includes multi asset scheme and b) Gold ETFs.
all unitholders shall be given a time-period of at least 30 days to exercise the option to exit at prevailing NAV without charging of exit load, if any.
Appoint a dedicated fund manager with requisite skill and experience in commodities market (including commodity derivatives market).
Appoint a custodian registered with the Board for custody of the underlying goods, arising due to physical settlement of contracts.
Have written down investment policy for participation in ETCDs approved by the Board of the Asset Management Company and the Board of Trustees.
Have written down valuation policies approved by the Board of the AMC and the Board of Trustees for valuation of commodity derivatives and the underlying goods...
before investing in GDS of Banks, GMS and ETCDs having gold as the underlying, mutual funds shall put in place written policy with regard to such investments with due approval from the Board of the Asset Management Company and Board of Trustees.
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Source: SecMarx — Participation of Mutual Funds in Commodity Derivatives Market in India. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.