Participation of Portfolio Managers in Commodity Derivatives Market in India
Summary
This circular permits Portfolio Managers to participate in Exchange Traded Commodity Derivatives on behalf of their clients, superseding previous restrictions. It mandates the appointment of SEBI registered Custodians and requires specific disclosures, agreements, and reporting regarding such participation. The document also includes a Gazette Notification amending the SEBI (Portfolio Managers) Regulations, 1993 to legally enable these activities.
Text
Portfolio Managers are now permitted to participate in Exchange Traded Commodity Derivatives on behalf of their clients.
It would be mandatory for Portfolio Managers to appoint SEBI registered Custodian before dealing in Exchange traded Commodity Derivatives.
Portfolio Managers may participate in Exchange Traded Commodity Derivatives on behalf of their clients and such participation shall be in compliance with all the rules, regulations including SEBI (Portfolio Managers) Regulations, 1993 and circulars/guidelines and position limit norms as may be applicable to ‘clients’.
Portfolio Managers may participate in Exchange Traded Commodity Derivatives after entering into an agreement with the clients.
Portfolio Managers shall provide adequate disclosures in the Disclosure Document as well as the agreement with the client pertaining to their participation in the Exchange Traded Commodity Derivatives, including but not limited to the risk factors, margin requirements, position limits, prior experience of the Portfolio Manager in Exchange Traded Commodity Derivatives, valuation of goods etc.
In case dealing in Commodity derivatives lead to delivery of physical goods... the goods need to be disposed off at the earliest, within the timelines as agreed upon between the client and the Portfolio Manager. The responsibility of liquidating the physical goods shall be with the Portfolio Manager.
Since Foreign Portfolio Investors are not allowed to participate in the Exchange Traded Commodity Derivatives market, Portfolio Managers shall not onboard Foreign Portfolio Investors until such time as they are permitted to participate in Exchange Traded Commodity Derivatives market.
Portfolio Managers shall also provide periodic reports to the clients as per Regulation 21 of SEBI (Portfolio Managers) Regulations, 1993 regarding their exposure in Exchange Traded Commodity Derivatives.
Portfolio Managers shall report the exposure in Exchange Traded Commodity Derivatives under the heading of ‘Commodity Derivatives’ in the monthly reports submitted to SEBI.
The provisions of this circular shall come into effect from the date of the circular.
The Exchanges are advised to make necessary amendments to the relevant bye-laws, rules and regulations; bring the provisions of this circular to the notice of the members of the Exchange and also to disseminate the same on their website; communicate to SEBI, the status of the implementation of the provisions of this circular.
“custodian” means a person who has been granted a certificate of registration to carry on the business of custodian under the Securities and Exchange Board of India (Custodian) Regulations, 1996;
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Source: SecMarx — Participation of Portfolio Managers in Commodity Derivatives Market in India. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.