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Informist, Thursday, May 14, 2026

 

--SEBI mulls changes to master circular for exchanges, clearing corporations 

--SEBI mulls ease of doing business norms for commodity derivatives segment 

 

MUMBAI – The Securities and Exchange Board of India Thursday issued a consultation paper on exchange-traded derivatives, the third one in a series reviewing regulatory rules for stock exchanges. In the latest paper, SEBI has made several proposals simplifying existing rules for equity and commodity derivatives contracts to promote ease of doing business. Many of these proposals are in the nature of streamlining accounting for recent changes and redundancy, and some rules common to both segments have been proposed to be merged. It has invited public comments on the proposals by Jun. 4.

 

SEBI has proposed deleting the close-to-money option series in commodity derivatives contracts on the grounds that there is no concept of close-to-money options on international commodity exchanges given the complexities it creates in the exercise mechanism. Traders find it difficult to look into the intrinsic costs associated with the close-to-money options, SEBI said in the paper, adding that the product posed challenges to buyers and sellers both.

 

SEBI also put forth easing the process for advancement of the expiry date of commodity derivatives contracts in the event of spot markets being closed on the expiry day. Under the proposed modification, an advancement in the expiry date of such contracts will require approval of only the managing director of the exchange, and would not warrant approval from the product advisory committee and the regulatory oversight committee. As per the proposal, the expiry advancement decision will be required to be intimated to traders by giving adequate notice before the revised date, as against the current requirement of giving a 10-day notice.

 

Another proposal in the paper by the market regulator was aimed at clarifying the responsibility of exchanges to monitor position limits in various equity, money, and commodity derivatives contracts. SEBI wants exchanges to be responsible for monitoring position limits, but is fine with them explicitly outsourcing the monitoring to clearing corporations through formal agreements with clearly outlined roles and responsibility of both parties and commercial dealings on an arm's length basis.

SEBI also proposed modification of the disclosure process for the bi-annual evaluation report by exchanges under the product success framework for index derivatives. Under the proposed change, exchanges will be required to upload the evaluation reports on their websites instead of submitting them to SEBI. This norm is adopted from a similar requirement in the stock derivatives segment and aims to streamline divergent practices followed by the exchanges. 

 

It proposed to do away with the requirement for exchanges to intimate SEBI, while imposing stringent position limits on commodity derivatives. This also applies to cases where exchanges may want to modify permissible limits otherwise. 

 

SEBI also mooted issuance of a separate master circular for clearing corporations to promote simplification of regulatory requirements. This is aimed at delineating compliance obligations for exchanges and clearing corporations. 

 

Norms on risk management frameworks for equity derivative instruments, commodity derivative instruments, money market derivative instruments, and derivative contracts on foreign indices will form a part of the circular being proposed. The entire chapter of the master circular for the commodity derivatives segment will be included in the proposed circular. 

 

Further, norms in the framework to enable verification of upfront collection of margins and option premiums, and segregation and monitoring of collateral at client level from the master circular for exchanges and clearing corporations are also proposed to be merged. Similarly, norms on non-collection or short collection of client margins and rationalisation, the imposition of fines for false or incorrect reporting margins or non-reporting of margins by trading members and clearing members will also form a part of the proposed circular.

 

SEBI also suggested demerging paragraphs of the master circular for commodity derivatives that deal with the ‘participants in commodity derivative markets' such as foreign portfolio investors, portfolio management services and mutual funds, which already form a part of various other master circulars.  End

 

Reported by Prateem Rohanekar

Edited by Tanima Banerjee

 

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