India eases derivatives rules to unlock market

Mutual fund schemes will no longer require approval from majority of unit holders to invest in derivatives.

Indian financial authorities have amended strict rules for fund managers looking to trade the derivatives market, opening the market up for investors.

Existing mutual fund schemes no longer require approval from a majority of unit holders to invest in derivatives as long as investors are given an exit option’, the Securities and Exchange Board of India (SEBI) said this week.

“Obtaining positive consent from majority of unit holders as mandated above is challenging on account of vast geographical spread of unit holders and hence the request for doing away with such requirements,” the Indian regulator explained.

Following discussions with the Mutual Find Advisory Committee, SEBI eased rules for derivatives investors with immediate effect.

Last month, SEBI increased the combined futures and options trading limit to 20% of the applicable market-wide position limit in a bid to ease trade requirements for brokers. 

The easing of rules could see a boost in derivatives trading volumes across the region, which has historically stifled activity with strict regulation.

Chairman at SEBI, UK Sinha, explained in an annual report last year the regulator is committed to reshaping and refining derivatives market regulations.

“With firm and steady steps, SEBI will ensure that in coming years, commodities derivatives market is at par with securities market in all aspects – technology, new products and participants, risk management and regulations,” he said.