The Securities and Exchange Board of India (Sebi) on Thursday came out with the framework for foreign investors to participate in exchange-traded commodity derivatives.

The regulator said foreign portfolio investors (FPIs) will be allowed only in cash-settled non-agricultural commodity derivative contracts and indices.

FPIs other than individuals, family offices and corporates may participate in commodity derivatives products as ‘clients’ and would be subject to rules and position limits.

FPIs belonging to categories such as individuals, family offices and corporates will be allowed a position limit of 20% of the client level position limit in a particular commodity derivative contract, Sebi said.

The new rule for FPIs would come into effect immediately.

Sebi has also discontinued the route for eligible foreign entities in exchange-traded commodity derivatives because of their non-participation.

In October 2018, the capital market regulatorallowed foreign entities having actual exposure to Indian commodity markets, to participate in the commodity derivative segment of stock exchanges for primarily hedging their exposure.