Sebi Delays Deadline For Implementing Framework For Issuance of Offshore Derivatives By FPIs

FPI Regulations: Capital market regulator, Securities Exchange Board of India has postponed the deadline for the enactment of its framework for offshore derivative instruments issued by Foreign Portfolio Investors (FPIs). The framework has been introduced to tighten norms governing the trading of derivative instruments issued by FPIs according to a circular released by the market regulator.

As per the circular the the deadline for the implementation of the new framework has been extended to November 17, 2025. Earlier the framework was expected to come into effect on May 17.

The postponement of the deadline to November is likely to provide additional time for FPIs to comply. As per the circular FPIs and ODIs with segregated portfolios, additional disclosures will be required as a part of the new framework.

"Based on representations received from market participants and in order to ensure smooth implementation of the said circular (issued in December), it has been decided to extend the timeline, ...to November 17, 2025," Sebi said.

Earlier in December, 2024 Sebi released a circular to address the issue of regulatory arbitrage with respect to Offshore Derivative Instruments (ODIs) and FPIs with segregated portfolios vis-à-vis FPIs.

The market regulator proposed to stop FPIs from issuing ODIs with derivatives as the underlying/reference. Among the other key changes proposed in the new framework, Sebi also added that FPIs will be not be allowed ot hedge ODIs with derivatives on Indian stock exchanges.

Additionally, the market regulator proposed that FPIs can only issue ODIs if they have a separate dedicated registration. The registration will be marked in the form of the ‘ODI’ suffix on the FPI’s PAN card. The addition of the suffix will not be treated as a name change for existing foreign investors.

The market regulator has also proposed that the ownership disclosure requirement for FPIs be updated to match that of natural persons if their equity ODI positions make up 50 per cent and above from a single Indian corporate group or if their total equity positions in the domestic market is beyond Rs 25,000 crore. Notably, this will include ODI positions taken through multiple FPI accounts and holdings of entities with common ownership.

While the market regulator has proposed the updation of disclosure norms for select FPIs, it has made entities like government and government-related investors registered under the FPI regulations, certain Public Retail Funds (PRFs) and Exchange Traded Funds (ETFs) with exposure lower than 50 per cent to Indian markets exempt from these disclosure norms.