The Securities and Exchange Board of India (Sebi) did not announce any curbs on derivatives trading at its board meeting on Monday but took a slew of decisions that included the introduction of a regulatory framework for a new investment product and ushering in a liberalised Mutual Funds Lite (MF Lite) framework for passively managed schemes.
The market regulator also plugged the regulatory gap in offshore derivative instruments (ODIs), or participatory notes, issued by overseas funds and foreign portfolio investors (FPIs) by tightening ODI rules.
The Sebi release after the board meeting was silent on F&O trading even as investors went on a selling spree in stocks fearful of restrictions.
The absence of any F&O measures suggests steps could be taken at the next board meeting. Some foreign portfolio investors (FPIs) are reported to have expressed apprehensions over any restrictions.
This was the first board meeting after the allegations of conflict of interest were made both by Hindenburg Research and the Opposition Congress party against Sebi chairperson Madhabi Puri Buch. The release did not mention whether the matter was discussed at the meeting.
The board cleared a proposal to introduce a new asset class for high-risk profile investors to bridge the gap between mutual funds and portfolio management services.
The minimum investment for the new product will be ₹10 lakh per investor across all investment strategies of the new product in a particular asset management company.
Safeguards for the new product will include no leverage, no investment in unlisted and unrated instruments beyond those already permitted for mutual funds and derivatives exposure limited to 25 per cent of asset under management for the purposes other than hedging and rebalancing.
The board also announced relaxed rules for passive mutual fund (MF) schemes.
It approved amendments to the Sebi (Mutual Funds) Regulations, 1996 for enabling a relaxed framework with ‘light-touch’ regulations called “MF Lite framework”.
The light touch regulations include relaxed requirements relating to eligibility criteria for sponsors, including net worth, track record and profitability, responsibility of trustees, approval process and disclosures.
The board approved a proposal to apply the additional disclosure framework through its August 24, 2023 circular directly to ODI subscribers, and other structures of FPIs with segregated portfolios.
The regulator has decided to increase the number of scrips eligible for trading under the optional T+0 settlement. It will be done in a phased manner from the top 25 to top 500 in terms of market capitalisation.
