SEBI Steps for Curbing Volatility in Commodities Derivatives Markets

By | January 16, 2016
Securities and Exchange Board of India
PR No. 13/2016

Steps for Curbing Volatility in Commodities Derivatives Markets

In accordance with Central government notifications F. No. 1/9/SM/2015 S.O. 2362 (E) and F. No. 1/9/SM/2015 S.O. 2363 (E) dated August 28, 2015, SEBI had commenced regulating the commodity derivatives market under Securities Contracts Regulation Act (SCRA) 1956 with effect from 28th September, 2015.

With a view to curb the speculative participation and consequent volatility in prices of agricultural commodities, SEBI has reviewed the existing norms related to commodity derivatives markets and has decided to make following regulatory changes in the case of trading of agricultural commodities :-

  1. Reducing the position limits for near month contracts for both member and client level from present 50% to 25% of the overall position limits for all contracts expiring in the month of March, 2016 and onwards.
  2. Reducing the Daily Price Limits (DPL) from 6% to 4%.

SEBI has also reviewed the performance and operation of the forward contracts being traded on the Commodity Derivatives Exchanges and as a risk management measure has decided to stop entering into fresh contracts by the participants in Forwards Segment till further orders. However, the existing contracts will be allowed to be settled as per the terms of the contracts.

These steps are being taken in the interest of trade and public interest and for instilling confidence of market participants in commodity derivatives markets.

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