Sebi allows comexes to modify futures contract specifications

However, exchanges must inform Sebi and market participants well in advance before any modification

The Securities and Exchange Board of India (Sebi) has allowed commodity exchanges to modify futures contract specifications suiting to the market requirement quickly. As of now, the modification in contract specifications required prior approval from the regulator.

A circular to this effect issued on Tuesday said, "To ensure that exchanges are enabled to respond to the market requirements quickly, 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 centres, 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."

Sebi, however, directed commodity exchanges to inform market participants and the regulator well in advance before introduction of any modification in contract specification with reasons for the modifications. 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.

The list of contracts available for trading, however, will be reviewed by Sebi from time to time.

Through a circular on Tuesday, Sebi said that exchanges can offer continuous trading in futures contacts according to the regulations of the concerned exchange. However, in case of discontinuation of any contract, the exchanges are required to inform market participants well in advance and shall keep the regulator informed with adequate reasons for the same.

De-listing of already contact with "nil" open interest would require to inform the regulator with adequate reasons. The re-launch of discontinued contracts, however, require prior approval from the Sebi.

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 (FSSAI), Agmark, Bureau of Indian Standard (BIS) etc.