Sebi issues disclosure norm for commodity exchanges

Markets regulator Securities and Exchange Board of India (Sebi) on Monday asked commodity exchanges to make quarterly disclosure about disablement of member terminals, along with duration of such activity, due to shortage of funds and margins.

Sebi had started regulating commodity markets after the merger of Forward Markets Commission (FMC) with the markets regulator in September last year.

This circular is being issued to consolidate and update such norms prescribed for commodity bourses by erstwhile FMC.

“The disablement of terminals of the members along with duration of disablement due to shortage of funds, margin money etc, shall be disclosed by exchange on its website at the end of every quarter - June 30, September 30, December 31 and March 31,” Sebi said in a circular.

The regulator said that exchanges can decide the timelines for submission of delivery instruction by members based on their assessment of the time required for marking as well as for modifying any delivery intentions wrongly marked.

The exchanges would have to determine and disclose for contracts the location premium/discount prior to launch of the contract in various commodities.

As per Finance Act, 2015 all rules, directions, guidelines, instructions and circulars made by FMC or the central government applicable to recognised associations under the Forward Contracts (Regulation) Act, 1952 would remain in force for one year from the date of repealing FCRA or till such time as notified by Sebi, whichever is earlier.

FCRA was repealed on September 29, 2015.

In the mechanism for regular monitoring of and penalty for short collection of margins from clients "require only initial margins to be collected upfront by members (from their clients) and penalty structure to be applicable from T day for short-collection/non-collection of only initial margins," Sebi said.

"It is clarified that extreme loss margin (ELM) is also required to be collected upfront and the penalty structue," it added.