The Securities and Exchange Board of India has proposed the introduction of net value settlement for foreign portfolio investors, aimed at simplifying the trading process and reducing funding costs.
Under the proposal, large foreign portfolio investors would be allowed to settle trades based on their net position instead of settling each transaction individually. At present, foreign investors are required to settle every buy and sell transaction separately under a gross settlement framework.
According to the proposal released on Friday, foreign portfolio investors frequently execute multiple buy and sell transactions in a single trading day. The existing gross settlement system requires cash to be maintained for each individual transaction. The proposed net value settlement framework would allow offsetting of buy and sell transactions, with settlement required only for the residual net amount.
SEBI said the move is intended to lower funding costs for foreign portfolio investors by reducing the need to maintain cash for each transaction. It is also expected to simplify operational processes and reduce settlement-related timelines.
The proposal is part of SEBI’s broader reform measures aimed at improving ease of operations for foreign investors and strengthening the depth of Indian capital markets. The regulator has been focusing on streamlining investor registration processes, improving trading platform efficiency, and reducing operational risks for foreign investors.
SEBI stated that the proposed changes are designed to make the Indian securities market more efficient and accessible for foreign portfolio investors.
