Guidelines for Liquidity Enhancement Scheme (LES) in Commodity Derivatives Contracts
Summary
This circular amends guidelines for the Liquidity Enhancement Scheme (LES) in commodity derivatives contracts by exempting newly formed exchanges from specific financial caps. The exemption applies to exchanges within their first five years of operation, provided they adhere to net-worth and reserve creation conditions. Exchanges are required to amend bye-laws, notify brokers, and report implementation status to SEBI.
Text
The manner in which exchanges can provide LES under the extant circular No. CIR/MRD/DP/14/2014 dated April 23, 2014 is as under: ‘5.1. Discount in fees... incentives... shall not exceed 25% of the net profits or 25% of the free reserves... 5.2. Shares... shall not exceed 25% of the issued and outstanding shares...'
An exchange in early years of its formation/commencement of business may not be able to generate profits... it has now been decided to exempt such exchanges, during their first five years of operation... from the applicability of clauses 5.1 and 5.2 of said SEBI circular No. CIR/MRD/DP/14/2014...
The yearly incentives that such an exchange can earmark for LES shall not exceed 25% of the audited net-worth of the said exchange as on the last day of the previous financial year.
Such exchange shall create a reserve specifically to meet its LES incentives/expenses and transfer funds to such reserve accordingly. However, such reserves shall not be included in the calculation of Exchange net worth.
Such exchange however shall continuously comply with the minimum net-worth requirement as per Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018.
The provisions of this circular shall be effective from the date of this circular.
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.
Exchanges are advised to: i. make necessary amendments to the relevant bye-laws, rules and regulations. ii. bring the provisions of this circular to the notice of the stock brokers of the Exchange and also to disseminate the same on their website. iii. communicate to SEBI, the status of the implementation of the provisions of this circular
Source: SecMarx — Guidelines for Liquidity Enhancement Scheme (LES) in Commodity Derivatives Contracts. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.