FII DIVISION

FITTC DEPARTMENT

E-MAIL : santoshks@sebi.gov.in

WEB SITE : http//www.sebi.gov.in

FAX : 00 91 22 22845776

TEL : 00 91 22 22850451

Dear Sir/Madam,

Sub: Applicability of investment limit in Exchange traded derivative contracts

SEBI has been receiving various queries about applicability of investment limits for FII transactions in derivatives.

In this regard, it is clarified that :

"Trading by FIIs and their sub-accounts in derivatives contracts till these are not resulting into settlement by physical delivery of underlying stocks shall not attract the investment limit of 10% or 5% of the total issued capital of the company as prescribed in Regulations 15(5) and (6) of the SEBI(FII) Regulations, 1995 . "

The custodians of securities are requested to bring the contents of this circular to the notice of their constituents. The circular is also available at the web page Legal Framework on the SEBI website at www.sebi.gov.in.

Yours faithfully,