In order to check possibility of speculation in the domestic capital markets, the Securities and Exchange Board of India (SEBI) has put in place a stronger monitoring mechanism to restrain the exposure of foreign institutional investors (FIIs) to Interest Rate Futures (IRF) within limits.
The marker regulator also asked the market participants to keep information on daily basis about aggregate gross long positions of FIIs in IRFs, which is a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing asset such as government bonds. Referring to foreign investors’ adherence to prescribed regulatory limits, the SEBI has noted that exposure of overseas entities along with their investments in government securities should be taken into account for monitoring their adherence to prescribed regulatory limits. Presently, FIIs are allowed to investment a maximum of $25 billion in government securities.
Further, the SEBI in its circular stated that stock exchanges of the country should provide information regarding aggregate gross long position in IRF of all FIIs taken together at end of the day to the depositories including NSDL and CDSL and shall also publish the same on their website. Meanwhile, the depositories are also now required to aggregate the gross long position of FIIs in IRF in each stock exchange. As per the SEBI, in case the total of cash and IRF of all FIIs reaches 85 per cent of the permissible limit, the depositories would have to inform Reserve Bank of India (RBI), SEBI and stock exchanges. Once FIIs utilise the maximum exposure limit of 90 per cent of limit, they are not allowed to further increase their long position in IRF. Furthermore, SEBI noted that FIIs violating these norms would attract stringent action.
The marker regulator also asked the market participants to keep information on daily basis about aggregate gross long positions of FIIs in IRFs, which is a contract between a buyer and a seller agreeing to the future delivery of any interest-bearing asset such as government bonds. Referring to foreign investors’ adherence to prescribed regulatory limits, the SEBI has noted that exposure of overseas entities along with their investments in government securities should be taken into account for monitoring their adherence to prescribed regulatory limits. Presently, FIIs are allowed to investment a maximum of $25 billion in government securities.
Further, the SEBI in its circular stated that stock exchanges of the country should provide information regarding aggregate gross long position in IRF of all FIIs taken together at end of the day to the depositories including NSDL and CDSL and shall also publish the same on their website. Meanwhile, the depositories are also now required to aggregate the gross long position of FIIs in IRF in each stock exchange. As per the SEBI, in case the total of cash and IRF of all FIIs reaches 85 per cent of the permissible limit, the depositories would have to inform Reserve Bank of India (RBI), SEBI and stock exchanges. Once FIIs utilise the maximum exposure limit of 90 per cent of limit, they are not allowed to further increase their long position in IRF. Furthermore, SEBI noted that FIIs violating these norms would attract stringent action.
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