Sebi allows direct market access to FPIs to participate in ETCDs

Capital markets regulator Sebi on Wednesday allowed stock exchanges to extend direct market access facility to foreign portfolio investors (FPIs) for participation in Exchange Traded Commodity Derivatives (ETCDs).

The new provision would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said in a circular.

Direct Market Access (DMA) facilitates the clients of a broker to directly access the exchange trading system through the broker’s infrastructure to place orders without manual intervention by the broker.

Also, DMA provides certain advantages to brokers such as direct control over orders, faster execution of orders, reduced risk of errors associated with manual order entry, maintaining confidentiality, lower impact costs for large orders and implementing better hedging and arbitrage strategies.

“Based on representations received for enabling DMA facility to FPIs in ETCDs and deliberations by Commodity Derivatives Advisory Committee (CDAC) of Sebi, it has been decided to allow stock exchanges to extend DMA facility to FPIs for participation in ETCDs,” the regulator said.

This permission is subject to certain conditions that require brokers to follow procedure for application for DMA, operational specifications, client authorisation, and broker-client agreement, risk management, among others.