Equity derivatives professionals were relieved last week when the Indian regulator said hedge funds will not be included in its equity rule change. Last month the Securities and Exchange Board of India promulgated regulations that stated only 'regulated' end users could invest in the domestic equity market, which appeared to rule out hedge funds and quash the equity-linked product market. "There were howls of protest," said an equity head at a bulge bracket house. Access products, which SEBI classifies as participatory notes, is nearly a one hundred million dollar a year business, according to one head of equities.M. Thiripalraju, an official at SEBI in Mumbai, did not return calls.
The SEBI has told bankers that the regulation is targeting onshore institutions and money laundering. SEBI also clarified that hedge funds, which are governed by investment managers, are considered regulated entities and are not barred from using such instruments.
