Sebi tightens norms for agri commodities trading

To curb speculative trades in agricultural commodities, markets regulator Sebi today tightened norms for trading of such derivative contracts and suspended forward trading in all fresh contracts.
The move assumes significance as a number of farm commodities are said to have taken a hit due to prevailing drought conditions for the second year in a row and production is expected to be lower.
"It has been decided that participants in Forward Segment shall not be allowed to enter into fresh contracts till further orders. However, the existing contracts shall be allowed to be settled as per the terms of the contracts," Sebi said in a circular.

Sebi began regulating commodities derivatives market in September 2015.
Announcing a number of measures to "curb the speculative participation and consequent volatility in prices of agricultural commodities derivatives", Sebi lowered the Daily Price Limits (DPL) for Barley, Chilli, Jeera and Turmeric to 4 per cent -- including 2 per cent in the initial slab and further 2 per cent in the enhanced slab.
For all other agricultural commodities, the initial slab limit has been revised to 3 per cent and to a further 1 per cent for the enhanced slab.

The revised DPL norms would be applicable with effect from February 1, 2016.

Once the initial slab limit is reached in any contract, then after a period of 15 minutes this limit would be increased further by enhanced slab, only in that contract.
The trading would be permitted during the 15 minutes period within the initial slab limit. After the DPL is enhanced, trades shall be permitted throughout the day within the enhanced total DPL of 4 per cent.
The slab-wise DPL norm would be applicable uniformly on all trading days.
In addition, Sebi also reduced the Near month Position Limits.
Currently in case of agricultural commodity derivatives, client level (individual traders) and member level (brokers) near month position limits in any commodity are 50 per cent of their overall position limits for that commodity. This near-month position limit has now been revised from 50 per cent to 25 per cent.

(Reopens DCM 86)
Later in a statement, Sebi said the steps have been taken in the interest of trade and general public and are aimed at instilling confidence in participants in the commodity derivatives markets.
The regulator said it has "reviewed the performance and operation of the forward contracts being traded on the commodity derivatives exchanges and as a risk management measure has decided to stop entering into fresh contracts by the participants in the forward segment".