Permission for trading in futures contracts and modification in contract specifications at exchange level
Summary
This circular consolidates and updates norms for National Commodity Derivatives Exchanges regarding the permission to trade in futures contracts and modifications to contract specifications. It mandates that exchanges submit a detailed checklist of information when proposing new or renewed contracts and outlines conditions for continuous trading approval. The document grants exchanges limited power to modify specific contract parameters while requiring prior notice to market participants and regulators.
Text
Rules, directions, guidelines, instructions, circulars, or any like instruments, made by the erstwhile Forward Markets Commission (FMC) or the Central Government applicable to recognised associations under the Forward Contracts Regulation Act, 1952 (FCRA) would continue to remain in force for a period of one year from the date on which FCRA was repealed (September 29, 2015), or till such time as notified by SEBI, whichever is earlier.
All proposals of exchange for launch of new contract and/or for renewal of existing/earlier contracts shall be accompanied by complete information covering all the points delineated in the check-list appended at Annexure 1.
The Exchange wise list of contracts approved for continuous trading is placed at Annexure 2. Approval for continuous trading in futures contracts is contingent upon volume and open interest at the Exchange.
Except for the specifications permitted to be modified at exchange level (para 3c below), contracts specifications and contract launch calendar should not be changed without prior approval. For any modification in contract specification or contract launch calendar, the 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.
If Exchange decides not to launch new contract for trading, then Exchange shall inform market participants well in advance and shall also keep the regulator informed with adequate reasons for not launching of such contract. If Exchange decides to de-list already running contract(s) having nil open interest, then exchange shall keep the regulator informed with adequate reasons for de-listing the contract(s).
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 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 Exchange, being the first tier regulator, shall ensure that there is no unhealthy speculative trading in the market, which may result in cornering or artificial rigging up or down of the prices by a particular member or group or class of members.
National Commodity Derivatives Exchanges are permitted to modify the futures contract specifications related to Ticker symbol, Basis, Maximum order size, Trading unit, Delivery unit, Quotation base value, Tick size, Delivery centers, additional delivery centers, issue related to Premium/Discount, Quality parameters and its relevant aspects such as Quantity variation and Tolerance limit in the futures contract specifications.
The provisions of this circular shall come into effect immediately.
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.
Source: SecMarx — Permission for trading in futures contracts and modification in contract specifications at exchange level. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.