Sebi mulls settlement netting for FPIs to ease costs, cut compliance load

Sebi Chairman Tuhin Kanta Pandey said the regulator is examining whether FPIs can net same-day trades - a move aimed at easing operational burden and reducing costs for overseas investors

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The Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Wednesday said the regulator is examining whether foreign portfolio investors (FPIs) can be allowed to net their settlements for trades executed within the same day — a move that would mark a major shift from the current trade-wise settlement regime.

 

“Currently, FPIs are required to give and take delivery for every trade. We are examining whether netting of settlements for trades executed on a single day can be permitted. This would ease operational convenience and reduce costs for FPIs,” Pandey said at the Goldman Sachs India CIO Conference. 

The discussion comes against the backdrop of heavy FPI outflows: Since January 2024, overseas investors have sold equities worth ₹1.5 trillion, even as domestic institutional investors have pumped in ₹12 trillion over the same period.

 

Despite the rising dominance of domestic capital, Pandey stressed that “foreign investors remain central to our markets,” noting India’s long-standing symbiotic relationship with global funds.

 

Pandey outlined a series of forward-looking reforms aimed at creating a “best-in-class experience” for global investors as India’s capital markets evolve into a key pillar of economic growth.

 

He announced a major digital upgrade to the FPI registration process, with an end-to-end paperless system using digital signatures. This is expected to bring down registration timelines from several months to just a few days. A second registration platform, being developed by Central Depository Services Limited (CDSL), will also be launched to improve service efficiency.

 

Pandey added that SWAGAT-FIs — a newly introduced fast-track category for trusted foreign institutions — may eventually be permitted to invest through other FEMA-approved routes without additional compliance steps. Sebi is in discussions with the RBI and the Finance Ministry to enable this.

 

Looking ahead, Pandey said Sebi will prioritise deepening the cash equities market. A working group will undertake a comprehensive review of short selling and the securities lending and borrowing framework to strengthen linkages between the cash and derivatives markets.

 

He confirmed that Sebi is committed to introducing a closing auction session after stakeholder consultations, a move expected to improve price discovery.

 

Pandey also highlighted corporate bond market development as a core focus area, stressing the need for greater retail participation in fixed-income products. On the commodities side — both agri and non-agri — he said Sebi is exploring ways to facilitate more institutional participation while maintaining robust risk controls.