Sebi tweaks risk management norms for commodity derivatives segment

Members of clearing corporations in commodity derivatives segment need to have a minimum liquid networth of Rs 50 lakh, Sebi said today.

Tweaking the risk management norms for commodity derivatives segment, the regulator also said commodity derivatives exchanges should comply with provisions related to acceptance of Fixed Deposit Receipts (FDRs) by clearing corporations.

The norms related to minimum liquid networth and Base Minimum Capital (BMC) requirements applicable for clearing members in commodity derivatives are different from that applicable for clearing members in equity derivatives and currency derivatives.

In a circular, Sebi said it has been decided to align norms related to BMC and liquid networth.

Now, "members of clearing corporations in commodity derivatives segment shall maintain a minimum liquid networth of at least Rs 50 lakh at all points of time and shall not have any BMC requirement.

Liquid networth refers to a clearing member's liquid assets after adjusting for applicable margins.

According to the regulator, initial margins, ELM, additional margins or any other margins as may be specified by Sebi from time to time can be deducted from the liquid assets of a clearing member to arrive at liquid networth of a member.

In July 2016, a circular was issued on acceptance of FDRs by clearing corporations.

"Commodity derivatives exchanges shall also comply with the provisions of that circular within three months from the date of this circular.

"Thus, trading/ clearing members of commodity derivatives exchanges, who have deposited their own FDRs or FDRs of associate banks, shall replace such collateral with other eligible collateral as per extant norms, within a period of three months," the latest circular said.

Further, commodity derivatives exchanges have been asked to comply with provisions of a circular, issued in January this year, pertaining to margin provisions for intra-day crystallised losses within three months.