Risk management for Regional Commodity Derivatives Exchanges

CIR/CDMRD/DRMP/2/2015 · 2015-10-21 · SEBI Division of Risk Management and Products, Commodity Derivatives Market Regulation Department

Summary

This circular mandates risk management norms for Regional Commodity Derivatives Exchanges following their deemed recognition as stock exchanges under the SCRA. It requires compliance with specific margin, collateral, and settlement standards by April 1, 2016. The document outlines obligations for transparency, member communication, and implementation of these regulatory measures.

Text

This circular applies to Regional Commodity Derivatives Exchanges as defined in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2015.

Exchanges shall comply with the following norms latest by April 01, 2016.

Exchanges shall continue with their practice of keeping exposure free member deposits at the current level.

Exchanges shall levy minimum ordinary margins of 4% on the open outstanding positions.

Exchanges may levy appropriate delivery period margins, additional margins etc. based on their evaluation.

Exchanges have the right to impose additional risk containment measures over and above the risk containment system mandated by SEBI.

Additional risk management measures would normally be required only to deal with circumstances that cannot be anticipated or were not anticipated while designing the risk management system.

Any additional margins that the exchanges may impose shall be based on objective criteria and shall not discriminate between members on the basis of subjective criteria.

Every effort must be made to make the risk management systems fully transparent by disclosing their details to the public.

Exchanges shall levy ordinary margins at the level of each individual client comprising his positions in futures contracts across different maturities.

All applicable margins shall be collected by Exchanges before start of trading on the next trading day.

If the member’s collateral is insufficient to cover the required margin and deposit requirements, member shall not be allowed by Exchanges to further increase his open positions.

Source: SecMarx — Risk management for Regional Commodity Derivatives Exchanges. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.