- NRIs will use PAN instead of CP Codes to track position limits in derivatives trading.
- NRIs will be allowed to trade through multiple Clearing Members (CMs) without needing an NOC.
- The change aims to simplify the process and improve efficiency.
- Public comments on the proposal can be submitted until December 31, 2024.
The Securities and Exchange Board of India (SEBI) has proposed a new way to make it easier for Non-Resident Indians (NRIs) to trade in exchange-traded derivatives. The change, announced on Tuesday, suggests using the Permanent Account Number (PAN) as a unique identifier to track the position limits of NRIs, instead of the current system that requires NRIs to get a Custodial Participant (CP) Code.
Right now, NRIs wanting to trade derivatives must go through a Clearing Member (CM) to get a CP Code. They can only trade through one CM at a time, and if they want to switch to a different CM, they need to get a No Objection Certificate (NOC), which can be a hassle.
What’s Changing?
SEBI’s new proposal will simplify this process:
- No more CP Codes: Instead of needing a CP Code, NRIs will use their PAN to monitor their trading limits.
- Multiple CMs allowed: NRIs will no longer be restricted to one CM. They can trade through more than one CM without needing an NOC.
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Proposed Changes by SEBI
To address these issues, SEBI has proposed using PAN instead of CP Codes to monitor NRI position limits. Here’s how the proposed changes compare with the current system:
| Current Process | Proposed Change |
|---|---|
| NRIs need to obtain a CP Code through a Clearing Member (CM). | PAN will be used as a unique identifier for monitoring NRI position limits. |
| NRIs can only trade through one CM at a time. | NRIs can trade through multiple Clearing Members without restrictions. |
| Switching Clearing Members requires a No Objection Certificate (NOC). | NRIs will no longer need an NOC to switch Clearing Members. |
With the new system, NRIs will have more flexibility in how they trade and will no longer be bound by the restrictions of using just one CM.
Why is SEBI Making These Changes?
SEBI wants to make it simpler for NRIs to invest in derivatives and remove unnecessary steps that make the process slow and complicated. The goal is to improve efficiency and make the market more accessible.
SEBI has invited feedback from the public on this proposal. If you have any thoughts or comments, you can share them by December 31, 2024.
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