The Securities and Exchange Board of India on 29th June 2021 has decided to introduce cross margin benefit between Commodity Index futures and futures of its underlying constituents or its variants, in order to improve the efficiency of the use of the margin capital by market participants.
The Cross margin benefit of 75 % on Initial Margin may be allowed for eligible off setting positions of index futures and futures of its underlying constituents or its variants and the cross margin benefit shall be computed at the client level on an online real time basis and provided to the trading member / clearing member, as the case may be.
To be eligible for the cross margin benefit, contracts belonging to Index futures and underlying constituents or its variants shall belong to the same expiry month or to the nearest expiry month and should be from amongst the first three expiring contracts only.
Clearing Corporations/Exchanges may introduce cross margin benefit, after back testing for adequacy of cross margin to cover Mark to Market losses (MTM) for a minimum period of six months. Initial margin after cross margin benefit should be able to cover MTM on at least 99% of the days as per back testing.
