Sebi issued this clarification today. "Clarifications have been sought on para 1 of the Proposed Measures in the draft discussion paper on Overseas Derivatives Instruments (ODIs), with Indian Exchange Traded Derivatives as underlying. With regard to the above, it is made clear that there is no proposed bar on ODI contracts, expiring this month or in the following months, being renewed, provided the renewal does not go beyond 18 months.
It is further made clear that this proposal does not in any manner seek to restrict renewal or rollover of Indian Exchange Traded Derivative Contracts by the FIIs. Mumbai October 17, 2007" source: www.sebi.gov.in link The original para said “shall not issue/renew ODIs with underlying as derivatives with immediate effect”. The regulator is clarifying that current positions can be maintained till 18 months.
The confusion would have been caused by ‘issue/renew’ phrase. Sebi should separate this in the final guidelines, when issued. There is also no bar on FII trading in Indian derivative contracts, it has been clarified though it is apparent that the bar was on ODIs. This may have brought comfort to markets, with the Sensex down just 295 points at the time of posting. Para 1 1. FIIs and their sub-accounts shall not issue/renew ODIs with underlying as derivatives with immediate effect. They are required to wind up the current position over 18 months, during which period SEBI will review the position from time to time.