Guidelines for identification and selection of location as a delivery centre(s) for commodity derivatives contract
Summary
This circular establishes uniform guidelines for stock exchanges to identify and select delivery centres for commodity derivatives contracts. It mandates that exchanges review existing delivery centres based on specific criteria such as demand, liquidity, and infrastructure. The document requires these reviews to be completed within three months and communicated to the Product Advisory Committee.
Text
Considering the inter-play of various factors, a particular location can be identified and selected as a delivery centre by a stock exchange based on all or combination of the following guidelines.
There should be adequate consumption demand throughout the year and/or adequate supply at least during the expiry month(s) in and around the location; The location should have a sizeable production catchment area and arrivals; The location should be an active consumption centre/trading centre attracting adequate supplies from other production centres to fulfil demand for processing, consumption, trade, etc.
The location should have high potential to attract trading and delivery participation in the derivatives contract.
There should be adequate participation or representation from different segments of the commodity value chain of the commodity viz., farmers/producers, traders, millers, processors, exporters, users, etc. who are interested in trading / delivering the commodity at such location proposed to be designated as a delivery centre.
There should be presence of sufficient and sizeable number of warehouses in and around the location capable of handling the deliveries on expiry of the contract and capable of getting registration with Warehousing Development and Regulatory Authority (WDRA) wherever applicable, before the launch of the contracts. There should be adequate transport links (road or rail connectivity), presence of assaying and testing facilities, processing plants, etc., for effecting smooth deliveries.
Feedback from all the stake holders including Farmers/ Farmer Producers Organization (FPOs)/ Traders/ Value Chain Participants (VCPs)/ Corporates/ Micro, Small & Medium Enterprises (MSMEs),Processors, Exporters etc., should be obtained and duly considered before selecting a location for designating as delivery centre(s) of a particular commodity.
The stock exchanges shall carry out a review of the delivery centre(s) already designated and notified for the existing commodity derivatives contracts, based on the aforesaid guidelines.
The stock exchanges shall submit their assessment in the form of a comprehensive review report to their Product Advisory Committee (PAC) constituted for respective commodity for consideration and advice.
The stock exchanges shall undertake and complete the aforesaid Review stated at Para 4 above for Financial Year 2019-20 within 3 months from the date of this Circular. Comments/ observations/ suggestions from PAC leading to change/replacement in any of the existing delivery centre(s) may be shared with SEBI for information purpose, within 1 month of completion of the said Review.
Henceforth, the requisite information highlighted at Para 3 and 4 above shall form part of the information to be submitted to PAC for their consideration in terms of the reference provided in the aforesaid Circular. All the above stated information shall also be submitted by the stock exchanges to SEBI while submitting application for contract approval or renewal.
The provisions of this Circular shall be effective from August 01, 2020.
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.
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Source: SecMarx — Guidelines for identification and selection of location as a delivery centre(s) for commodity derivatives contract. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.