The clarification came after Tuesday evening’s draft Sebi discussion paper on overseas derivatives instruments (ODIs) with Indian Exchange Traded Derivatives was interpreted by some sections that FIIs and their sub-accounts would be forced to unwind their derivative positions with immediate effect.

The Sebi clarification clears the air of uncertainty over the fate of renewal of PNs that are due to expire this month or will expire in the coming months.

Sebi’s paper, released late evening on Tuesday had said: FIIs and their sub-accounts  shall not issue/renew ODIs (popularly called participatory notes or PNs) with underlying as derivatives with immediate effect. They are required to wind up current position over 18 months, during which period Sebi will review the position from time to time.”

No bar on contracts
In a clarification, Sebi said: “It is made clear that there is no proposed bar on ODIs contracts, expiring this month or in following months, being renewed, provided the renewal does not go beyond 18 months.” The capital markets regulator further said: the proposal does not in any manner seek to restrict renewal or rollover of Indian Exchange Traded Derivative Contracts by the FIIs.

Sebi’s clarification came after the Sensex crashed by over 1,700 points within minutes of commence of trading, leading to closure of markets for an hour. The markets, however, have recovered considerably after an assurance by Finance Minister that there is no proposal to completely ban Participatory Notes.