SEBI proposes easing F&O trading for NRIs, replacing CP Code with PAN as unique identifier

The Securities and Exchange Board of India (SEBI) on Tuesday proposed easing trading norms for Non-Resident Indians (NRIs) in the futures and options (F&O) segment by replacing the existing Custodial Participant (CP) Code system with Permanent Account Number (PAN) as a unique identifier.

In a consultation paper, SEBI suggested doing away with the operational inefficiencies faced by NRIs, including the need to obtain a CP Code and notify Clearing Members (CMs) to monitor position limits in exchange-traded derivatives. The regulator said the move will create operational efficiency for NRI clients to trade in the derivatives segment, thereby improving the ease of doing investments for NRIs.

Under the current system, NRIs are required to obtain a CP Code from clearing corporations through a CM, who oversees position limits. NRIs can only engage with one CM at a time, requiring a no-objection certificate (NOC) to switch.

"In order to bring ease of investment for NRIs to trade in derivatives and simplify procedure of monitoring NRI position limits, it is proposed to issue circular on 'operational efficiency in monitoring of NRI position limits in Exchange Traded Derivatives Contracts - ease of doing investment' to remove the requirement for NRIs to have a CP Code and deal with only one CM," SEBI said.

Also, it suggested using PAN to monitor NRI position limits, similar to how client-level positions are monitored.

"PAN may also be used as a unique identifier for monitoring position limits of NRIs by CCs. Further, CCs may monitor position limits of NRIs using PAN in the same manner as is already being done for monitoring client level positions. Accordingly, no separate CP Code would be required, if PAN is used for this purpose," the regulator said.

SEBI has sought public comments on the draft circular till December 31.