Brief Overview:
One of the key changes proposed in the ODI space is the prohibition on issuing ODIs with derivatives as underlying and to be fully hedged with same securities on a one-to-one basis.
Existing ODIs (hedged with derivatives) to be redeemed or hedged with cash positions on a one-to-one basis within 1 year.
SEBI in its recent Board Meeting tabled certain proposals to ensure ODIs are subjected to disclosure requirements.
The amendments to FPI laws reflecting the said proposals are awaited.
Technical Details:
Some other proposal discussed were: –
1) Non-compliance of disclosure requirements:
(a) Redemption of ODIs/ liquidation of segregated portfolio within 180 days.
(b) Defaulting ODI subscribers to become ineligible to subscribe/ hold any positions through ODIs from any ODI issuing FPI.
2) ODIs to only have cash equity/debt securities/other non-derivative permissible investment by FPI as underlying & be fully hedged with the same securities on a one-to-one basis.
3) Separate dedicated FPI registration required for ODI issuances (other than ones with Govies as underlying), with no proprietary investments under such registration.
Previously, a consultation paper on investment by Foreign Investors through Segregated Portfolios/ P-notes/Offshore Derivative Instruments was issued by SEBI inviting for comments from public on similar proportions.
JC takeaway:
While we gather that the objective for these proposals was to enhance transparency by increasing the granularity of disclosures, unclear as to how some of the propositions fit into it.
For further details, please see:
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