Sebi tightens margin norms for commodities trading to curb negative pricing

The Securities and Exchange Board of India (Sebi) has tightened the margin norms for the commodity derivatives market. The move is a fallout of oil prices slipping into negative territory in the futures market last year.

The regulator has said “pre-expiry margins” will be imposed on cash-settled contracts wherein the underlying commodity is deemed susceptible to possibility of near zero and/or negative prices. These margins will be levied five days ahead of the expiry date and they will increase by 5 per cent each day.

Imposition of higher margins is aimed at significantly reducing reduction open interest as the contract