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Additional Risk Management Norms For National Commodity Derivatives Exchanges

SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated 1st September, 2016

1. With an objective of streamlining and strengthening the risk management framework across national commodity derivatives exchanges SEBI vide circular CIR/CDMRD/DRMP/01/2015 dated October 01, 2015, had prescribed comprehensive risk management framework for National Commodity Derivatives Exchanges.

2. In order to further strengthen the risk management framework of commodity derivatives markets and avoid any systemic risk, it has been decided to prescribe additional norms/modify (to the extent specified hereunder) certain existing norms on risk management at National Commodity Derivatives Exchanges. The additional/modified norms are placed at Annexure-I.

3. The norms prescribed in this circular shall be implemented by national commodity derivatives exchanges latest by December 1, 2016, except for the norm prescribed for base minimum capital at paragraph 7 of Annexure-I, which shall be complied with latest by April 01, 2017.

4. It is emphasized that risk management is primarily the responsibility of exchanges. In cases of excessive market volatility or circumstances where risk element is higher, exchanges are expected to impose higher margins and/or additional margins in the form of special/ ad-hoc or other margins as considered appropriate by the exchanges.

5. The exchanges are also advised to:
i. ensure that their risk management framework is in line with the provisions contained in the annexure and take steps to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the same.
ii. bring the provisions of this circular to the notice of their members and also to disseminate the same on their website.
iii. communicate to SEBI, the status of implementation of the provisions of this circular.

6. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Annexure-I is available here -  link

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