Position Limits for Commodity Derivatives, clubbing of open positions, penalties for violation of position limits

SEBI/HO/CDMRD/DMP/CIR/P/2016/96 · 2016-09-27 · SEBI

Summary

This circular consolidates and updates norms for position limits in commodity derivatives, covering both agricultural and non-agricultural commodities. It establishes distinct calculation methods for client and member positions, including specific rules for netting versus adding long and short positions based on commodity type. The document also mandates the clubbing of open positions to prevent circumvention and outlines monitoring and penalty procedures for violations. Annexure B establishes guidelines for clubbing open positions of individuals, firms, companies, HUFs, and trusts to ensure they do not exceed prescribed limits. It provides exemptions for cooperative societies and independent directors lacking financial interest to prevent undue restriction on market participation. Annexure C outlines penal provisions, including monetary penalties and suspension, for members violating open interest norms.

Text

Erstwhile FMC had from time to time prescribed norms with regard to Position limits... SEBI vide its circulars... has issued revised norms with regard to position limits of agricultural commodity derivatives.

This circular is hereby issued in continuation of the above said SEBI circulars with an objective of consolidating and updating norms with regard to position limits and also to prescribe numerical position limits for all commodities which are presently being traded on the Commodity Derivatives Exchanges.

Numerical value of overall client level open position limits, shall be applicable for each commodity as are provided in table given in Annexure- A to this circular.

The Exchanges, however, in their own judgment, may prescribe limits lower than what is prescribed by SEBI by giving advance notice to the market under intimation to SEBI.

For the purpose of position limits, norms applicable on client level positions shall also be applicable to the proprietary positions of trading members and while calculating member’s open positions, his proprietary positions shall be treated and computed like a client’s positions.

For the purpose of calculating overall position of a member, the overall position of its all clients... shall be added without netting off among themselves as also against proprietary positions of the member. Thus, all long clients and all short clients shall be added up separately and higher of the two shall be reckoned as Member’s open position...

For the purpose of calculating overall position of a client, all long and short positions of the client across all contracts shall be netted out.

Client level position limits shall be equivalent to the numerical level limit as given in table in Annexure- A or 5% of market-wide open interest, whichever is higher.

Member level position limits shall be 10 times of the numerical value of client level position limits or 20% of the market-wide open interest, whichever is higher.

For the purpose of calculating positions of a client, all long and short positions of the client across all contracts shall be added up separately and higher of the two shall be considered as his overall open position.

The overall Client level position limits across all contracts shall be equivalent to the numerical level limit as given in table in Annexure- A.

The overall member level position limits across all contracts shall be 10 times the numerical value of client level position limit or 15% of the market-wide open interest, whichever is higher.

Source: SecMarx — Position Limits for Commodity Derivatives, clubbing of open positions, penalties for violation of position limits. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.