Norms for investment and disclosure by Mutual Funds in Exchange Traded Commodity Derivatives (“ETCDs”)

Last updated: 19 January 2021

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This circular from SEBI provides clarifications on how mutual funds can invest in Exchange Traded Commodity Derivatives (ETCDs). It specifies that certain short positions in ETCDs, related to physical holdings or offsetting long positions, will not count towards the cumulative gross exposure limit. Additionally, mutual funds are prohibited from writing options or buying instruments with embedded written options on commodities or commodity futures.

Securities and Exchange Board of India CIRCULAR SEBI/HO/IMD/DF2/CIR/P/2021/10 January 15, 2021 To, All Mutual Funds/ Asset Management Companies (AMCs)/ Trustee Companies/ Board of Trustees of Mutual Funds/ All recognized Stock Exchanges/ Association of Mutual Funds in India (AMFI)

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FAQ :

The circular clarifies the norms for investment and disclosure by Mutual Funds in Exchange Traded Commodity Derivatives (ETCDs).

Yes, certain short positions in ETCDs will not be considered in the cumulative gross exposure. These include short positions not exceeding the holding of underlying goods from physical settlement and short positions not exceeding the long position in ETCDs on the same goods.

No, mutual funds are explicitly prohibited from writing options or purchasing instruments with embedded written options in goods or on commodity futures.

Yes, all other conditions mentioned in the previous SEBI circulars dated May 21, 2019, and June 05, 2020, remain unchanged.