SEBI Eases Derivatives Trading Rules for NRIs; CP Code and Clearing Member Declaration No Longer Needed

Mumbai, July 30, 2025 – The Securities and Exchange Board of India (SEBI) has significantly relaxed compliance norms for Non-Resident Indians (NRIs) investing in exchange-traded derivatives. As per Circular SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/109 dated July 29, 2025, the regulator has eliminated the mandatory requirement for NRIs to register Custodial Participant (CP) codes or declare their clearing members for derivatives trading.

Key Regulatory Change

Earlier, as per SEBI’s October 29, 2003 circular, NRIs were required to:

• Notify the exchange about their appointed Clearing Member(s)aa
• Obtain a unique Custodial Participant (CP) Code from the exchange

New Framework:

Starting now, NRIs can trade in exchange-traded derivatives without needing a Custodial Participant (CP) code. Just like domestic investors, their position limits will be tracked directly by stock exchanges and clearing corporations. This move aligns NRI investors with client-level position monitoring already specified by SEBI.

• Clearing member notification, which was earlier mandatory, is no longer required.
• CP code assignment, previously a compulsory step, is now not required.
• Earlier, position limit monitoring was done by the exchange using the CP code; now, this is carried out at the individual client level by the exchange or the clearing corporation.

Implementation Timeline & Exchange Obligations

SEBI has directed all recognized stock exchanges and clearing corporations to:

• Amend rules, bye-laws, circulars, SOPs, and FAQs to reflect this change
• Issue updated operational guidelines within 30 days of the circular date
• Allow existing NRI clients to exit from CP code registration within 90 days via email request
• Provide a mechanism for NRI clients to opt out of CP code in the future if desired

Legal Authority

This circular has been issued under:

• Section 11(1), Chapter IV of the SEBI Act, 1992
• Regulation 30, Chapter VII of SEBI (Stock Brokers) Regulations, 1992
• Regulation 51, Chapter IX of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018

Strategic Implication

The move is expected to simplify onboarding and ongoing compliance for NRIs participating in India’s derivatives market, enhancing the “ease of doing investment” and aligning with feedback from the Brokers’ Industry Standards Forum.

REF: https://www.sebi.gov.in/legal/circulars/jul-2025/operational-efficiency-in-monitoring-of-non-resident-indians-nris-position-limits-in-exchange-traded-derivatives-contracts-ease-of-doing-investment_95679.html

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