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News Topical, Digital Desk : The Securities and Exchange Board of India (SEBI) is considering allowing trade netting for foreign portfolio investors (FPIs). This could make portfolio rebalancing easier and cost-effective, sources familiar with the discussions said. The proposal, which is in its early stages, would allow FPIs to consolidate their buy and sell positions in different securities.
Currently, each trade has to be settled separately. This feature will be useful when global funds buy one stock and sell another to rebalance their portfolio or index.
What did SEBI say?
SEBI Whole-Time Member Ananth Narayan told Moneycontrol, "We are considering several measures to simplify operations for FPIs. More than margin, the question is whether we should allow netting between purchases and sales of different securities." Narayan said that this proposal would require coordination with the Reserve Bank of India (RBI) and changes to existing regulations. He said, "This will require changes to SEBI and RBI regulations and circulars. This also involves intraday risk, as payment has to be made upfront." He stressed that the discussions are still in their initial stages.
Discussions with Stakeholders Narayan said that SEBI will consult all stakeholders, including other regulators, before taking this proposal forward. He said, "We will discuss with all stakeholders. Following the Welcome proposal, we are trying to simplify investment and trading for FPIs without increasing risk." Earlier this year, SEBI launched the Welcome platform to simplify the registration and operations process for FPIs. Allowing netting could be another step in this direction.
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