SEBI, by way of its circular dated October 9, 2018, has permitted participation of eligible foreign entities (‘EFEs’) in the commodity derivatives market in India. Prior to the issue of this circular, foreign entities were not permitted to directly participate in the Indian commodity derivatives market, even if they imported/exported various commodities from/to India. EFEs’ participation has not been allowed in contracts having an underlying commodity which has been termed as a ‘sensitive commodity’, in terms of SEBI Circular dated July 25, 2017, on Position Limits for Agricultural Commodity Derivatives or by any other stipulation by SEBI, which are disclosed on the websites of recognized stock exchanges having commodity derivatives segment (‘CDS Exchanges’). Key eligibility conditions have been prescribed by SEBI for participation of EFEs in commodity derivatives market in India.

The Circular also specifies certain other compliance requirements to be met by EFEs including, inter alia, the know your client requirements, position limits, documentation and other applicable conditions, risk management; monitoring of limits and physical exposure, etc.