SEBI allows NRIs to trade in derivatives without notifying names of clearing members or CP code

Non-Resident Indians (NRIs) are no longer required to notify names of clearing members or obtain a custodial participant (CP) code to trade in derivatives in India, the Securities and Exchange Board of India (SEBI) announced on Tuesday, July 29.

This decision is taken based on the recommendation by the Brokers' Industry Standards Forum, aimed at enhancing the ease of doing investment for NRIs in India and maintaining operational efficiency.

“As a step towards ease of doing investment and convenience to NRIs for trading in exchange traded derivatives contracts, to bring in operational efficiency and in line with the recommendation received from Brokers’ Industry Standards Forum, it has been decided to do away with the mandatory requirement of NRIs having to notify the names of the Clearing Member/s and subsequent assignment of CP Code to the NRIs by the Exchange,” SEBI said in its circular dated July 29.

Further, their position limits will be monitored at the client level, like domestic investors.

Accordingly, for NRIs trading in exchange-traded derivative contracts without the CP code, the exchange/clearing corporation would monitor the NRI position limits in the manner similar to the client-level position limits monitored by them, it said.

The position limits for NRIs would be the same as the client-level position limits specified by the market regulator from time to time.

Currently, NRIs have to inform the bourses about their clearing members, as well as obtain a CP code, which is used by the exchange to track their positions in the derivatives market.

SEBI has directed the stock exchanges and clearing corporations to implement these changes within 30 days and allow the existing NRI clients to opt out of the CP code framework by sending an email request within 90 days.

Moreover, NRIs who initially opt for the CP code would be given an option to exit later by submitting an email request.