Sebi issues new risk management norms for regional comexes

Minimum ordinary margins of 4% has been prescribed and levy of other margins have been left to the descreton of exchanges

Stock market regulator Securities and Exchange Board of India (Sebi) on Wednesday issued a new set of regulations for regional commodity exchanges. At present, three such exchanges are active. Most of the regulations relate to margins, and exchanges shall implement these by April 1 next year.

Though these regulations are less stringent compared to those for national exchanges, Sebi has asked regional commodities exchanges to make margin-related changes and risk management systems transparent by disclosing their details to the public.

Minimum ordinary margins of four per cent have been prescribed. Levy of other margins has been left to the discretion of regional commodities exchanges. However, Sebi has prescribed criteria that the regional commodities exchanges should fulfil before levying margins. Client margin shall be across contracts. For member-level margin computation, margins shall be grossed across various clients. The proprietary positions of the member should be treated as that of a client for margin computation. All margins have to be collected before the start of trading.

Sebi also said the regional commodities exchanges shall collect collateral from their members only in the form of cash, pledging of bank fixed-deposits, and bank guarantees.

Regional commodities exchanges have been asked to levy mark-to-market margins daily computing on daily settlement prices.