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Sebi eases agricultural commodity derivatives position limits and penalties

Revised client-level limits are doubled to 2.0% for broad commodities, while penalties for breaches are scaled by both the size and duration of the violation.

Reported · Written up by our desk · Trade & Tariffs

India’s market regulator Sebi has eased position limits for agricultural commodity derivatives and revised the penalties for breaches, aiming to give market participants more room to trade, according to LiveMint Markets. In a circular issued Wednesday, Sebi said the 2017 position limits were being reviewed based on stakeholder feedback, recommendations from a working group and the Commodity Derivatives Advisory Committee, and public comments. Position limits act as a risk-control tool in commodity markets by capping the number of contracts a trader can hold to help curb excessive speculation, concentration, and potential price manipulation. Under the updated rules, revised client-level position limits will be based on annual deliverable supply and doubled to 2.0% for broad commodities, 1.0% for narrow commodities, and 0.5% for sensitive commodities. Commodities moving from the narrow to broad category will initially keep a 1.0% limit for one year, after which exchanges may raise it to 2.0% following a review. Sebi also tied penalties to the extent and duration of a position-limit breach. For violations exceeding 2.0% of the prescribed limit, the penalty will be the lower of 2.0% of the value of the excess position, calculated using the closing price and number of days of the violation, or ₹ 2 lakh, while breaches of up to 2.0% will be capped at ₹ 10,000.

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