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| Stock decline creates room for new P-notes | | | Rajesh Bhayani / Mumbai April 2, 2008 | | | |
| The decline in stock values has created room for the issue of fresh participatory notes, but there are not many takers.
| | | | P-notes are off-shore derivative instruments issued to foreign investors having securities as underlying.
FII FACT-SHEET
No of FIIs registered currently with the Sebi: 1319
No of FIIs registered with the Sebi prior to the restrictions on P-notes: 1113
No of FII sub accounts registered currently with Sebi: 3964
No of FII sub accounts registered with Sebi prior to restrictions on P-notes: 3445 | The Securities and Exchange Board of India (Sebi) had banned the issue of derivative P-notes on October 25 last year and restricted the issue of P-notes up to 40 per cent of the assets under custodians.
| | | | Since then, more than 200 new FIIs and over 500 sub- accounts have registered with the market regulator.
| | | | With the P-note holders registering themselves, many P-notes have been regularized and most FIIs now have the leg room to issue 5 per cent incremental P-notes and fresh P-notes against cancellations.
| | | | “When the Sebi restricted the issue of P-notes, there was virtually no room for issue of fresh P-notes. As per our estimates, it is now possible to bring out P-notes worth 25 per cent of the FII assets under custodians (AUC),” according to a FII broker.
| | | | Moreover, the brokers have started focusing on direct FII money rather than the P-note investments.
| | | | “The margins on P-note deals were 20 basis points (bps), whereas the margins on direct investments are higher,” said a foreign broking head of a leading domestic broking company.
| | | | The investors stand to gain from the lower transaction costs.
| | | | The new P-note regime and simpler FII registration procedures are being implemented based on the circular issued by Sebi on October 25 last year.
| | | | Those changes are now being accommodated in the FII regulations to make them more effective. | | |
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