Participation of AIFs in Credit Default Swaps

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....ons, 2012 ('AIF Regulations'), have been amended and notified on January 09, 2023 to allow AIFs to participate in Credit Default Swaps ('CDS') as protection buyers and sellers. Copy of the notification is available at link. 2. Regulations 16(1)(aa), 17(da), 18(ab) and 20(11) of AIF Regulations enable AIFs to participate in CDS in terms of the conditions as may be specified by SEBI from time to ....

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....ory III AIFs may sell CDS, by earmarking unencumbered Government bonds/Treasury bills equal to the amount of the said CDS exposure. Such earmarked securities may also be used for maintaining applicable margin requirements for the said CDS exposure. Exposure to CDS undertaken in the aforesaid manner shall not tantamount to leverage. 2.5. Total exposure to an investee company, including exp....

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....MD/DF/14/2014 dated June 19, 2014. 2.9. Further, for Category II AIFs and Category III AIFs which sell CDS by earmarking securities in the manner as mentioned at para 2.4 above, in case the amount of earmarked securities falls below CDS exposure: a. The AIF shall send a report to custodian on the same day of the breach. b. The AIF shall bring the amount of earmarked secu....

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....an thirty days, not more than four occasions in a year and not more than ten percent of the investable funds. In this regard, Category I and Category II AIFs which transact in CDS, shall maintain thirty days cooling off period between the two periods of borrowing or engaging in leverage. 2.12. All CDS transactions shall be on a platform regulated by SEBI or Reserve Bank of India ('RBI'), ....