INSUBCONTINENT EXCLUSIVE:
New Delhi: Markets regulator Sebi on Tuesday revised norms of compensation and penalty applicable on termination of contracts under the
regaining matched book regulations for commodity derivatives segment.
The regulator in September 2016 had come out with risk-mitigating
tools, christened as regaining matched book rule, for the commodity market.
A Sebi circular on Tuesday said that the norms related to
compensation and penalty applicable on tear-up of positions have been revised following feedback from Clearing Corporations and
stakeholders.
The revised norms call for voluntary tear-up at last mark-to-market price along with compensation equal to 10 per cent of last
mark-to-market price and penalty equal to 1 per cent of last mark-to-market price.
Similarly, partial tear-up (pro-rata against
members/clients having opposite positions) would be at last mark-to-market price along with compensation equal to 8 per cent of last
mark-to-market price and penalty equal to 1 per cent of last mark-to-market price (to be credited to SGF).
Earlier conditions were voluntary
tear-up at last mark-to-market price along with compensation (percentage of last mark-to-market price equal to twice the daily price limit)
and penalty (5%, to be credited to SGF); Partial tear-up (pro-rata against members/clients having opposite positions) at last markto-market
price along with compensation (%age of last mark-to-market price equal to thrice the daily price limit) and penalty (5%, to be credited to
SGF).
The circular mentioned that other provisions with regard to regaining of the matched book prescribed by Sebi in September 2016, will
continue to prevail.
"Based on the experience gained with regard to the implementation of these norms and the feedback from Clearing
Corporations (CCs) and other stakeholders, it has been decided to revise the alternatives in terms of compensation and penalty applicable on
tear-up of positions," the circular stated.
For timely and error free execution, CCs have been asked to have an automated system to
implement all such tools, it added.
"CCs shall put in place such system, and also conduct testing of the same, within six months from the
date of issuance of this circular," the regulator said.
