Sebi relaxes timelines for bourses to modify commodity derivative contracts

Sebi on Thursday relaxed the advance intimation requirement for exchanges for carrying out modifications in the contract specifications of commodity derivatives contracts.

The move is aimed at bringing in uniformity while giving effect to the contract modifications so that they have the desired impact and the modified contract represents a healthy replica of the physical market, Sebi said in a circular.

"It has been decided, in consultation with the stock exchanges, to reduce the number of days of advance intimation for all the three categories i.e. Category A, Category B and Category C, to 10 days," the regulator said.

Based on their materiality, the contract modifications are divided into three categories.

The permission to modify contract specifications is subject to the condition that before introduction of any modification, the exchanges need to inform Sebi and market participants along with reasons for the modifications.

At present, the advance intimation timelines are 10 days for category first and 30 days for category second and category third contract modifications.

In November 2019, Sebi had categorised the modifications in contract specification parameters in three categories.

The first one was non-material modifications which could be made at the exchange level in yet to be launched and running contracts.

In this category, the specification parameters related to ticker symbol, maximum order size, initial margin, extreme loss margin and 10 days advance notice was required to be given.

The second pertained to "material modifications which can be made at the exchange level in yet to be launched contracts or running contracts which have nil open interest."

The third category required Sebi's go ahead 30 days in advance with regard to contract launch calendar, trading period, daily price limit, among others.