Participation of Category III Alternative Investment Funds (AIFs) in the commodity derivatives market
Summary
SEBI permits Category III Alternative Investment Funds to participate in the Indian commodity derivatives market to enhance liquidity and price discovery. This participation is subject to specific conditions regarding investment limits, leverage, disclosure, and regulatory compliance. The circular outlines reporting obligations for AIFs and implementation steps for exchanges.
Text
it is now decided to allow the Category-III Alternative Investment Funds(AIFs) to participate in the commodity derivatives market, subject to the following conditions
Category III AIFs may participate in all commodity derivatives products that are being traded on the commodity derivatives exchanges as ‘clients’ and shall be subjected to all the rules, regulations and instructions, position limit norms as may be applicable to clients, issued by SEBI and Exchanges from time to time
Category III AIFs shall invest not more than ten percent of the investable funds in one underlying commodity
Category III AIFs may engage in leverage or borrow subject to consent from the investors in the fund and subject to a maximum limit, as specified by the Board from time to time
Category III AIFs shall make disclosure in private placement memorandum issued to the investors about investment in commodity derivatives. Consent of existing investor(s) shall be taken by AIFs if they intend to invest in commodity derivatives and exit opportunity should be provided to dissenting investor(s)
If applicable, AIF shall also comply with RBI notification No. FEMA. 355/2015-RB dated November 16, 2015 and all other guidelines issued by the RBI under Foreign Exchange Management Act, 1999 from time to time
Category III AIF shall be subject to the reporting requirements as may be specified by SEBI
The participation of Category III AIF in the commodity derivatives market shall be subject to the compliance of the provisions of SEBI (Alternative Investment Funds) Regulations, 2012 and circulars issued thereunder
The provisions of this circular shall come into effect from the date of the circular
This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market
make necessary amendments to the relevant bye-laws, rules and regulations
bring the provisions of this circular to the notice of the stock brokers of the Exchange and also to disseminate the same on their website
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Source: SecMarx — Participation of Category III Alternative Investment Funds (AIFs) in the commodity derivatives market. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.