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Markets regulator Sebi today asked exchanges to identify 'sensitive' agricultural commodities that are prone to government interventions or could have seen frequent price manipulation in the past.
Derivative trading in these 'sensitive' commodities would be restricted to an overall client-level position limit of 0.25 per cent of total deliverable supply, Sebi said in a circular.
The decision follows Sebi receiving feedback from the stakeholders that current numerical limits applicable for agricultural commodity derivatives are inadequate and not in consonance with the deliverable supply of the commodity.
Sebi has asked all the national commodity derivatives exchanges to jointly classify agricultural commodities into three categories -- sensitive, broad and narrow -- on annual basis.
The regulator said these commodities would be categorised based on the average of production data and import data of past five years on a rolling basis and keeping in view various extraneous factors that affect the trading in derivatives in any given year.
An agricultural commodity would be classified as a broad, if the average deliverable supply of such commodity for past five year is at least 10 lakh tonne in quantitative term and is at least Rs 5,000 crore in monetary term.
Sebi has said that derivative trading in these 'broad' commodities would be restricted to an overall client-level position limit of one per cent per cent of total deliverable supply.
If a commodity does not fall in either of two categories sensitive or broad then it would be called narrow commodity. In this category, position limits would be 0.5 per cent of the deliverable supply.
The deliverable supply for an agricultural commodity would be "production plus imports".
"Whenever an agricultural commodity of 'narrow' category is required to be re-categorised to 'broad' in subsequent years, such re-categorisation may be possible only if both, average deliverable supply of such commodity for the past five years and monetary value (Rs 5,000 crore) exceeds by more than 5 per cent," Sebi said.
Sebi has asked exchanges to complete this exercise at earliest and notify the same to the market within 20 days and the revised limits would become applicable for all running contracts with effect from October 1.
"For any agricultural commodity, the overall exchange- wide gross position limit on open interests shall be 50 per cent of its deliverable supply...Which shall also be jointly notified by exchanges along with client level numerical limits," the regulator noted.
With regard to clubbing of position limits, Sebi has directed exchanges to jointly formulate uniform guidelines and disclose them to the market within a month.