Revision in Daily Price Limits (DPL) for Commodity Futures Contracts
Summary
This circular revises the norms for Daily Price Limits (DPL) applicable to commodity futures contracts in India. It establishes specific percentage slabs for agricultural and non-agricultural goods, including mechanisms for enhanced limits after cooling-off periods. The document also details procedures for determining base prices on launch days and calculating settlement prices.
Text
The Daily Price Limits in commodity futures market serve an important function of defining the maximum range within which the price of a commodity futures contract can move in one trading session. The defined daily price limits protect investors from sudden and extreme price movements and provides cooling-off period to re-assess the information and fundamentals impacting the price of the commodity futures contract.
Continuing with SEBI’s endeavor to develop the commodity derivatives market and in consultation with the stock exchanges, the norms for DPL for commodity futures contracts (excluding Index Futures and options) are being revised.
The base price for fixing the DPL slabs shall be the previous day’s closing price of the underlying contract on the respective stock exchange.
The stock exchanges shall ensure that their system should only accept those orders which are within the relevant prescribed slab at any point of time.
A breach of the slab shall be considered when trading in a contract is executed at the upper or lower band of the prescribed slab.
Henceforth, the DPL shall be linked to the said classification of agricultural and agri-processed goods into “broad”, “narrow” and “sensitive” categories.
Accordingly, the DPL for commodity futures contracts based on agricultural and agri-processed goods has been revised as under: Broad/Narrow Initial Slab 4%, Enhanced Slab 2%, Aggregate DPL 6%; Sensitive Initial Slab 3%, Enhanced Slab 1%, Aggregate DPL 4%.
Once the initial slab limit is breached in any contract, then, after a cooling-off period of 15 minutes, this limit shall be increased further by enhanced slab, only in that contract.
During the cooling-off period of 15 minutes, the trading shall be permitted, within the initial slab limit.
Following slabs shall be applied for DPL on futures contracts based on non-agricultural goods: Energy/Metals/Precious Metals/Other Non-agricultural goods Initial Slab 6%, Enhanced Slab 3%, Aggregate DPL 9%; Gems and Stone Initial Slab 3%, Enhanced Slab 3%, Aggregate DPL 6%.
Once the initial slab limit is breached in any contract, the DPL for that contract shall be relaxed further by the ‘Enhanced Slab’ after the cooling off period of 15 minutes in the trading.
In case the price movement in the international markets is more than the aggregate DPL, the same may be further relaxed in stages of 3% by the Exchange with cooling off period of 15 minutes. For such instances, the Stock Exchanges shall immediately inform the Integrated Surveillance Department (ISD) of SEBI about any such relaxation of DPLs beyond Aggregate DPL, along with all the relevant details and justification for the same.
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Source: SecMarx — Revision in Daily Price Limits (DPL) for Commodity Futures Contracts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.