Pre-expiry margin from April to cut risk of negative pricing on commodities

News

Mumbai: Sebi has decided to impose pre-expiry margins on cash settled commodities that are susceptible to near zero or negative pricing risk.

A pre expiry margin will kick in during the last five trading days prior to expiry date, wherein the margin will increase by 5% daily, Sebi said in a circular late evening on Tuesday. This was done after consultations with the clearing corporations of exchanges.

Based on SEBI’s Risk Management Review Committee (RMRC) , the circular will be effective from April 1.

In April last year ,

settled the active crude contract at a negative Rs 2884 a barrel tracking the Nymex contract. This was opposed by brokers representing buy side clients as the global benchmark price turned negative after closure of trading on the domestic exchange.

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