The National Commodity & Derivatives Exchange (NCDEX) has decided to levy higher charges for open interest (OI), from Wednesday.
OI or the total number of open contracts on a security is the total number of futures contracts or option contracts that have not expired, been exercised (squared off) or fulfilled by delivery at the end of a day.
For a futures market, a higher OI is considered advisable as it reflects depth of the market.
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However, said NCDEX, “substantial amount of expenditure is being incurred in maintaining necessary infrastructure for facilitating risk management for the clients who hold end of-day positions on the exchange”. So, it said, it had decided to levy a Risk Management Fee of Rs 5 in every Rs 100,000 on the value of every fresh overnight OI position created in contracts of those commodities categorised as List ‘A’. These include several agricultural ones, such as unginned cotton, chana, oilseeds and oils, guar seed and gum.
The exchange said the fresh open position value will be computed daily, based on contract (expiry)-wise incremental open positions and charges be levied on that.
Meanwhile, the exchange issued a separate circular directing members, “not to allow any of the defaulter entities in National Spot Exchange Ltd (NSEL) to transact on the exchange platform and to undertake due-diligence to identify the related entities/sister concerns of entities declared as defaulters by NSEL and take suitable action.”