Revision of eligibility criteria for launching commodity futures contracts
Summary
This circular revises the eligibility criteria for launching commodity futures contracts by modifying Paragraphs 2.2 and 10.1 of the SEBI Master Circular dated August 4, 2023. It mandates that stock exchanges submit detailed proposals using Annexure P to SEBI for notification under Section 2(bc) of the SCRA, 1956. The revised norms include specific conditions for contract approval, launch timelines, and ongoing compliance with position limits and market surveillance standards.
Text
Based on representations received from market participants and deliberations by Commodity Derivatives Advisory Committee (CDAC) of SEBI, it has been decided to modify the norms under Paragraph 2.2 and Paragraph 10.1 of the Master Circular dated August 4, 2023 as under:
The stock exchanges shall also analyze all the proposed commodities on the afore-said parameters comprised in the template and submit the same to SEBI along with necessary supporting documentary evidence for referring the commodity for notification under section 2(bc) of Securities Contracts (Regulation) Act, 1956.
All derivative contracts approved by SEBI from time to time, are allowed to be traded in respective Stock exchange(s) on a continuous basis without requiring further approval unless SEBI advises/directs otherwise.
All proposals of stock exchange for launch of new contract shall be accompanied by complete information covering all the points appended at Annexure P of the Master Circular dated August 4, 2023 regarding Checklist of information/details for launch of new contract.
Approval for trading in futures contracts is subject to Rules, Byelaws and Regulations of the concerned Stock Exchange.
Stock exchange shall launch future contracts with contract specifications including launch calendar as approved by SEBI. Contract specifications and contract launch calendar shall be notified well in advance to the market participants on the website of the Stock Exchange.
Except for the specifications permitted to be modified at stock exchange level, contracts specifications should not be changed without prior approval. For any modification in contract specification, the Stock Exchange(s) shall give prior appropriate notice to the market participants. Once the contracts are commenced, no terms of the contract specifications should be changed without prior approval of SEBI.
The Stock Exchanges shall launch a contract within six months of approval by SEBI, failing which the stock exchange shall apply for fresh approval from SEBI for launching the contract.
In case the stock exchange decides not to launch new contract for trading or to de-list the already running contracts (s) having nil open interest, then stock exchange shall keep SEBI informed with adequate reasons for such decision.
The contracts approved for continuous trading in agri-commodities shall continue to follow the lean month expiry policy as laid down and shall be subject to any other directions as may be issued by SEBI from time to time. Also, apart from the approved quality standards, the stock exchange should ensure that the commodity deposited should comply with the regulations laid down by the other authorities like Food Safety Standard Authority of India, Agmark, BIS etc.
The stock exchange shall ensure that the prescribed position limits on open position of each member and non-member client and the limits on daily price fluctuation as specified in the contract specification are adhered to.
The permission granted for the contracts is subject to daily Mark to Market settlement of outstanding contracts as per the procedure and delivery mechanism/process specified in the Bye-laws, the Rules and the Regulations of the stock exchange.
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Source: SecMarx — Revision of eligibility criteria for launching commodity futures contracts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.