Tougher margin rules for select FPIs

Corporate entities, individuals and family offices will have to pay upfront margin

The Securities and Exchange Board of India (Sebi) on Thursday said certain foreign portfolio investors (FPIs) will have to meet margin requirements upfront, unlike others who meet the requirements on a T+1 basis.

“The trades of FPIs in Category I, II & III shall be margined on a T+1 basis…However, the trades of FPIs who are corporate bodies, individuals or family offices shall be margined on an upfront basis, as for non-institutional trades,” said a Sebi circular.

“Category I & II FPIs shall have position limits as presently available to FIIs (foreign institutional investors). Category III FPIs shall have position limits as applicable to the clients.”

The new regime is to take effect from June 1. The new guidelines for adequate risk management lay emphasis on increased disclosures. Entities trading on behalf of FPIs would need to disclose details to stock brokers, who must do so to the exchanges. Bourses would need to ensure allocation of trade by an FPI entity is permitted only within related FPIs.