SEBI Tweaks Derivatives Trading Rules for Easing Investments for NRIs

In a move to simplify the trading process for Non-Resident Indians (NRIs), the Securities and Exchange Board of India (SEBI) has scrapped the mandatory requirement for NRIs to notify stock exchanges about their clearing members or to obtain a Custodial Participant (CP) code for trading in exchange-traded derivatives.

SEBI said in a press release, “SEBI, vide Para II of Circular no. SEBI/DNPD/Cir-17/2003/10/29 dated October 29, 2003 (hereinafter mentioned as ‘circular’), inter alia, specified the operational modalities of monitoring of NRI position limits which required NRIs to notify the names of the Clearing Member/s for clearing derivative trades to the Exchange and assignment of a unique client code i.e. Custodial Participant (CP) Code to the NRI by the Exchange. The Exchange, in turn, would use this information to monitor the position limits of such NRI clients.”

Uniform Monitoring of Position Limits

Under the revised framework, NRIs’ position limits will now be monitored at the client level—just like domestic investors. This ensures uniform treatment across investor categories while streamlining regulatory oversight.

According to SEBI, the position limits applicable to NRIs will be aligned with the client-level limits specified by the regulator from time to time.

Objective: Ease of Doing Investment

This regulatory shift follows recommendations made by the Brokers' Industry Standards Forum. SEBI stated that the changes aim to enhance operational efficiency and improve the ease of investing in India’s derivatives market for NRIs.

For NRIs trading without a CP code, exchanges and clearing corporations will track their positions using the same client-level mechanisms currently in place for resident investors.

Implementation Timeline and Transition Options

Stock exchanges and clearing corporations have been directed to implement the new norms within 30 days.

Additionally, existing NRI clients will be allowed to opt out of the CP code framework by submitting an email request within 90 days. Members are also required to offer flexibility to those NRIs who initially choose to operate under the CP code system but later wish to exit it—again via a simple email request.

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