Mandatory requirements / Exit Policy for Commodity Derivatives Exchanges
Summary
This circular mandates exit policies for commodity derivatives exchanges based on trading suspension or failure to meet turnover and market share criteria. It outlines specific procedures for exchanges surrendering recognition, including asset valuation, distribution conditions, and payment of dues to SEBI. The document establishes requirements for investor protection fund transfers and contributions to the SEBI Investor Protection and Education Fund upon de-recognition.
Text
This circular applies to all such commodity derivatives exchanges as defined in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) (Amendment) Regulations, 2015.
If there is no trading operation on the platform of any commodity derivatives exchanges for more than twelve months, then in terms of the above circular, such exchange shall be liable to exit.
All National Commodity Derivative Exchanges shall continuously meet the turnover criteria of Rs. 1000 crores per annum. The Regional Commodity Exchanges shall ensure that they have at least 5% of the nation-wide market share... In case the National and Regional Commodity Exchanges fail to meet the above criteria for 2 consecutive years, they shall be liable to exit.
In the event a recognized commodity derivatives exchange, for any reason suspends its trading operations, it shall resume its trading only after ensuring that adequate and effective trading systems... are put in place and only after complying with all other regulatory requirements stipulated by SEBI from time to time. Further, such recognized commodity derivatives exchanges shall resume trading operations only after obtaining prior approval from SEBI.
The concerned commodity derivatives exchange shall not alienate any assets of the exchange without taking prior approval of SEBI.
For the purpose of valuation of the assets of the commodity derivative exchange, a valuation agency shall be appointed by SEBI. All the valuation charges shall be paid by the concerned exchange.
The concerned exchange shall transfer the Investor Protection Fund or any such fund to the SEBI Investor Protection and Education Fund.
The dues outstanding to SEBI and the annual regulatory fee.
The exchange will be liable to make good any shortfall in collection of dues of the brokers to SEBI.
In case any commodity derivatives exchange, after de-recognition, continues as corporate entity under the Companies Act, 2013, it shall not use the expression ‘stock exchange’ , ‘commodity derivative exchange’ or ‘exchange’ or any variant in its name or in its subsidiaries name so as to avoid any representation of present or past affiliation with the exchange.
The concerned commodity derivatives exchange shall set aside sufficient funds in order to provide for settlement of any claims, pertaining to pending arbitration cases, arbitration awards, not implemented, if any, liabilities/claims of contingent nature, if any, and unresolved investors complaints/ grievances lying with the exchange.
In case of de-recognition and exit, the stock exchange shall contribute up to 20% of its assets (after tax) towards SEBI Investor Protection and Education Fund (IPEF) for investor protection and in order to cover future liabilities, if any.
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Source: SecMarx — Mandatory requirements / Exit Policy for Commodity Derivatives Exchanges. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.