Risk Management norms for commodity derivatives
Summary
This circular mandates that Clearing Corporations in commodity derivatives must align their Base Minimum Capital and Liquid Net-worth norms with those applicable to equity and currency derivatives. It requires Trading and Clearing members to replace Fixed Deposit Receipts (FDRs) used as collateral with other eligible forms within three months. Additionally, exchanges are instructed to comply with specific margin provisions for intra-day crystallised losses and disseminate these regulatory updates to their members.
Text
Post the transfer of clearing and settlement functions from commodity derivatives exchanges to Clearing Corporations, Clearing Corporations shall be required to comply with all such norms.
members of Clearing Corporations in commodity derivatives segment shall maintain a minimum Liquid Net-worth of at least INR 50 Lakhs at all points of time and shall not have any Base Minimum Capital requirement.
Clearing member’s liquid assets after adjusting for applicable margins shall be referred to as ‘Liquid Net-worth’ of the clearing member. Initial margins, ELM, additional margins or any other margins as may be specified by SEBI from time to time shall be deducted from the liquid assets of a clearing member to arrive at ‘Liquid Net-worth’ of member.
Commodity Derivatives Exchanges shall also comply with the provisions of that circular within three months from the date of this circular.
Trading/Clearing members of commodity derivatives exchanges, who have deposited their own FDRs or FDRs of associate banks, shall replace such collateral with other eligible collateral as per extant norms, within a period of three months from the date of issuance of this circular.
Commodity Derivatives Exchanges shall also comply with the provisions of that circular within three months from the date of this circular.
The exchanges are advised to bring the provisions of this circular to the notice of their members and also to disseminate the same on their website.
This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Risk Management norms for commodity derivatives. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.