Sebi fixes daily price limit for non-agricultural commodities

Markets regulator Sebi today fixed daily price limits for non-agricultural commodities in order to ensure fair price discovery and curb price manipulation on exchanges.
Non-agricultural commodities have an aggregate daily price limit (DPL) of up to 9 per cent on both the upper and lower sides, Sebi said in a circular. Any price movement on either side beyond the set limits are not permitted.
The aggregate limit is up to 6 per cent for steel and 9 per cent for gold and other non-agri commodities.
The move is part of Sebi's objective of consolidating and updating norms prescribed by erstwhile FMC (Forward Markets Commission).

The Securities and Exchange Board of India (Sebi) started regulating commodities market since September last year, following the merger of FMC with itself.
With regard to steel, Sebi said that once the trade hits the prescribed initial slab of 4 per cent, DPL will be further relaxed by 2 per cent after a cooling off period of 15 minutes.

During cooling off periods, trading would continue to be permitted within the previous slab of DPL. There would not be further relaxation of DPL during that day.
Regarding gold and other non-agri commodities, Sebi said once the trade hits the prescribed initial slab (3 per cent), DPL will be further eased by 3 per cent without any cooling off period in the trading.

"In case first enhanced slab is also breached, then after a cooling off period of 15 minutes, the DPL shall be further relaxed by second enhanced slab (3 per cent)," Sebi said.
During cooling off periods, trading shall continue to be permitted within the previous slab of DPL.
"In case price movement in referencable international market is more than the aggregate DPL, the same may be further relaxed in steps of 3 per cent by exchanges.
"Exchanges shall immediately inform Integrated Surveillance Department of Sebi about any such relaxation of DPLs beyond Aggregate DPL, along with all the relevant details and justification," it added.

For fixing DPL slabs, previous day's closing price of the contract would be taken as base price. However, for first trading day of each contract, bourses would determine base price based on volume weighted average (VWAP) price of the first half an hour, subject to minimum of 10 trades.
"If the sufficient number of trades are not executed during the first half an hour, then VWAP of first one hour trade subject to minimum of 10 trades. If sufficient number of trades are not executed even during the first hour of the day, then VWAP of the first 10 trades during the day," it said.

For any commodity derivatives, bourses at their discretion can prescribe DPL narrower than the slabs prescribed by Sebi in case they require so based upon their analysis of price movements and their surveillance findings.
To promote competition and bring in greater efficiencies and lower transaction costs to market participants, Sebi said bourses can levy different transaction charges for different commodities' contracts and even in the case of contracts of the same commodity.
The exchanges will have to ensure that the "ratio between highest to lowest transaction charges in the turnover slab of any contract is not more than 1.5:1.