Description

SEBI eliminates mandatory CP code requirement for NRIs trading in derivatives, allowing position limit monitoring similar to regular client limits.

Summary

SEBI has issued a circular to improve operational efficiency in monitoring Non-Resident Indians (NRI) position limits in exchange traded derivatives contracts. The regulator has eliminated the mandatory requirement for NRIs to notify clearing member names and receive Custodial Participant (CP) codes from exchanges. Instead, exchanges will monitor NRI position limits similar to regular client level position limits.

Key Points

  • Elimination of mandatory CP code assignment for NRIs trading in derivatives
  • NRIs no longer required to notify clearing member names to exchanges
  • Position limit monitoring will be similar to regular client level monitoring
  • NRI position limits remain same as client level position limits specified by SEBI
  • Existing NRI clients can exit from CP code within 90 days via email request
  • Future flexibility for NRIs to exit CP code system if initially opted

Regulatory Changes

  • Removes Para II requirements of SEBI Circular SEBI/DNPD/Cir-17/2003/10/29 dated October 29, 2003
  • Exchanges no longer need to assign unique CP codes to NRI clients
  • Simplified operational processes for NRI derivative trading
  • Aligned with Brokers’ Industry Standards Forum recommendations

Compliance Requirements

  • Stock Exchanges/Clearing Corporations must notify members and publish on websites
  • Amendment of relevant Bye-laws, Rules, Regulations, Circulars, SOPs and FAQs required
  • New operational guidelines to be issued within 30 days of circular date
  • Members must provide CP code exit option to existing NRI clients within 90 days
  • Operational changes required to allow future CP code exits via email request

Important Dates

  • Circular Date: July 29, 2025
  • Operational Guidelines Deadline: 30 days from circular issuance (August 28, 2025)
  • NRI Client CP Code Exit Window: 90 days from circular issuance (October 27, 2025)

Impact Assessment

This circular significantly reduces operational complexity for both exchanges and NRI investors in derivative trading. It eliminates administrative burden of CP code management while maintaining effective position limit monitoring. The change is expected to encourage more NRI participation in Indian derivative markets by simplifying the trading process and reducing compliance requirements for brokers serving NRI clients.

Impact Justification

Streamlines NRI derivative trading processes and reduces compliance burden for exchanges and brokers