Participation of Mutual Funds in Commodity Derivatives Market in India

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....tional participation in Exchange Traded Commodity Derivatives (ETCDs), SEBI has permitted Category III Alternative Investment Funds to participate in exchange traded commodity derivatives vide circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/61 dated June 21, 2017 and also vide circular no. SEBI/HO/CDMRD/DMP/CIR/P/2018/134 dated October 09, 2018 permitted Eligible Foreign Entities (EFE) having actual exposure to Indian commodity markets, to participate in the commodity derivative segment of recognized stock exchanges for hedging their exposure. In furtherance to this objective, it has been decided to permit mutual funds to participate in ETCDs. 3. The participation of mutual funds in ETCDs would be subject to the following: i. Mutual f....

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....shall comply with the provisions of Regulation 18(15A) of SEBI (Mutual Funds) Regulations, 1996, as this will lead to change in fundamental attributes of the scheme and all unitholders shall be given a time-period of at least 30 days to exercise the option to exit at prevailing NAV without charging of exit load, if any. vii. Prior to participation in ETCDs, the AMCs shall adhere to the following: a) Appoint a dedicated fund manager with requisite skill and experience in commodities market (including commodity derivatives market). b) Appoint a custodian registered with the Board for custody of the underlying goods, arising due to physical settlement of contracts. c) Have written down investment policy for ....

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.... x. Schemes investing in ETCDs shall be benchmarked against an appropriate benchmark. xi. AMCs shall not onboard Foreign Portfolio Investors (FPIs) in schemes investing in ETCDs untill FPIs are permitted to participate in ETCDs. Investment Limits: 4. Participation of mutual funds in ETCDs shall be subject to the following investment limits: i. Mutual fund schemes shall participate in ETCDs of a particular goods (single), not exceeding 10% of net asset value of the scheme. However, the limit of 10% is not applicable for investments through Gold ETFs in ETCDs having gold as underlying. ii. In case of multi assets allocation schemes, the exposure to ETCDs shall not be more than 30% of the net asset value of t....