PR No.258/2007
SEBI issues Circular for acceptance of Foreign Sovereign Securities as collateral from Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions
At present, collateral deposited by FIIs, with the Clearing Members, for Exchange Traded Derivative transactions, is in the form of cash. Reserve Bank of India has now permitted FIIs to offer Foreign Sovereign Securities, with ‘AAA’ rating, as collateral to the recognised Stock Exchanges in India for their transactions in derivatives segment.
SEBI vide circular dated September 11, 2007, has permitted acceptance of Foreign Sovereign Securities, with ‘AAA’ rating, by clearing members, as collateral from FIIs, for Exchange Traded Derivative Transactions.
The foreign sovereign securities shall be treated as part of the cash component of the liquid assets of the Clearing Member, and shall be subject to the condition that the value of the foreign sovereign securities shall not be more than 10% of the total value of the cash component of the liquid assets of the Clearing Member. The Circular, inter-alia, provides that the type of foreign sovereign securities, to be accepted as collateral from FIIs, would be notified by SEBI from time to time.
To begin with, US Government securities, with ‘AAA’ rating, are eligible to be tendered as collateral by Foreign Institutional Investors (FIIs) for Exchange Traded Derivative Transactions.
The full text of the above circular is available on the website: www.sebi.gov.in
Mumbai
September 11, 2007