In September last year, the markets regulator had allowed FPIs to participate in ETCDs only for cash settled non-agricultural commodity derivatives contracts and indices.
“FPIs can commonly use the DMA facility to trade in equity markets. Sebi has now allowed them to do the same in ETCDs. This is a welcome move, considering the multitude of advantages that DMA offers to FPIs like direct control over their orders, faster execution of orders, reduced risk of errors, greater transparency, maintaining confidentiality, increased liquidity, lower impact costs for large orders,” said Suresh Swamy, partner, Price Waterhouse & Co.
DMA facilitates the clients of a broker to directly access the exchange trading system through the broker’s infrastructure to execute orders without manual intervention by the broker.
Sebi has noted that the DMA facility will also help in implementing better hedging and arbitrage strategies.
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Before this, Sebi had permitted eligible foreign entities (EFEs), which had actual exposure to the Indian commodity markets, to participate in the commodity derivatives segment for hedging. However, due to non-participation in over three years, the EFE route was discontinued in September 2022 and the FPI route was introduced.