Commexes empowered to bar futures manipulation by entities in collusion

The Forward Markets Commis-sion has directed all national commodity exchanges to rework their net open positions — meaning futures contracts bought or sold but not settled through delivery — to prevent any concerted manipulation.

Official sources said every commodity had its own nuances and the exchanges had been given flexibility to rework the positions to take into account any parameter they deemed fit to curb speculative trading. The new guidelines ask for a watch on concentration of positions of a single group or entities by “acting in concert” through common ownership and control structures of a company or a trading entity.

 

Following this, the National Commodity and Derivatives Exchange (NCDEX) has reworked its formula for calculating net open positions across contract positions. Sources said this was widely seen as a fallout of the recent guar and guar gum contract worries.

An official source said net open positions were being calculated by clubbing those of different co-operative societies and companies having common directors. The new parameters on “acting in concert” through common ownership and control structures and any other relevant criteria would get triggered if the exchange felt this was influencing trades and may result in concentration of positions in a specific commodity, directly or indirectly by a group of people or entities.

Net position is the difference between total open long (or buy) positions and open short (sell) positions in a given asset, in this case a commodity held by an individual or group or entity. Every exchange has a commodity-specific limit for the total open positions held by a party as a single entity or as a group exposure.

Meanwhile, NCDEX has stopped any fresh positions in guar gum contracts expiring January 2012, including a ban on intra-day positions.

Official sources say trading members will only be allowed to square existing positions for the January 2012 expiry contracts. Besides, it has imposed a special margin of 20 per cent on the buy side on all running contracts and yet to be launched contracts in guar and guar seed, to be collected in cash. This is in addition to the 40 per cent special cash margin imposed last week. Thus, the total special margin levied on the long or buy side will be 60 per cent, to be collected in cash, effective tomorrow.