The Securities and Exchange Board of India vide its Notification dated 26th May 2020 has issued guidelines to be followed by Stock Exchanges and Clearing Corporations having commodity derivatives segment while identifying and selecting a location as a delivery centre for commodity derivatives contracts. The new framework will be effective from 1ST August 2020.
Considering the interplay of various factors, a particular location can be identified and selected as a delivery centre by a stock exchange based on demand/supply dynamic, liquidity of the contract, infrastructure support and trade feedback.
Based on demand-supply dynamics, there should be adequate consumption demand throughout the year and/or adequate supply at least during the expiry month(s) in and around the location. The location should have a sizeable production catchment area and arrivals. In respect of liquidity of the contract, the regulator said the location should have high potential to attract trading and delivery participation in the derivatives contract. The stock exchanges will have to carry out a review of the delivery centre already designated and notified for the existing commodity derivatives contracts, based on the guidelines.
The stock exchanges will have to undertake and complete the review for the financial year 2019-20 within 3 months from the date of this circular.
Click here to read the Notification.
