Circular on Commodity Derivatives Contract
Circular on Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery
1.Warehousing or Storage infrastructure and its ancillary services play a critical role in the delivery mechanism of the Commodity Derivatives Market. A robust and credible warehousing infrastructure is sine qua non for an effective Commodity Derivatives Market that can inspire confidence amongst the market participants and other stakeholders. With this objective, Regulation 43A of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (“SECC Regulations”) provides,inter-alia, that every recognized Clearing Corporation (hereinafter referred to as “CCs”)providing clearing and settlement services for commodity derivatives shall ensure guarantee for settlement of trades including good delivery. To fulfil this obligation, it is imperative on the part of the Clearing Corporations to ensure that their accredited storage facilities exercise due diligence for safety and quality of the goods deposited with them for the purpose of delivery on exchange platform.
2.It is, therefore, incumbent upon the Clearing Corporations to put in place a comprehensive framework of norms for adherence by the Warehouse Service Providers (hereinafter referred to as “WSP/s”), assayers and other allied service providers engaged by them for ensuring good delivery as mandated under the SECC Regulations.
3.At the outset, it is clarified that the norms prescribed in this Circular are the minimum requirements/standards which the Clearing Corporation will set out for compliance by its accredited WSPs and assayers and are to be complied with in conjunction with the applicable norms laid down by Warehousing Development and Regulatory Authority (WDRA) or any other government authority overseeing the warehousing or storage infrastructure and its ancillary services for the respective goods.
4.The Clearing Corporations are at liberty to prescribe additional norms/guidelines for compliance by their accredited WSPs, warehouses and assayers, if they deem so fit, for ensuring good delivery of commodities by them. However, it must be ensured by the Clearing Corporationsthat such additional norms specified are not in contravention with the provisions of this Circular.
5.The Clearing Corporations shall put in place necessary arrangements for ensuring compliance with the provisions of Regulation 43A of SECC Regulations. Further, the Clearing Corporations shall have necessary arrangements to ensure that in the event of bankruptcy or insolvency of the WSP or other such contingency, there must be no restrictions placed upon owners/depositors of the commodity desiring to take possession of their individually identified commodity and remove it from the accredited Warehouse(s).
6.On the basis of various observations, inputs/feedback received during visits to different warehouses, meetings held with the WSPs, stock exchanges, Clearing Corporations and other stakeholders, it has been decided that in supersession of the earlier norms issued vide SEBI Circular no. SEBI/HO/CDMRD/DMP/CIR/P/2016/103 dated September 27, 2016, SEBI Circular no. SEBI/HO/CDMRD/DMP/CIR/P/2018/136 dated October 16, 2018 and SEBI Circular no. SEBI/HO/CDMRD/DNPMP/CIR/P/2019/29 dated February 11, 2019 the Clearing Corporations shall frame guidelines in accordance with the revised norms as specified in the Annexure.
7.With this Circular, there will be uniformity in requirements for agricultural and agri-processed commodities and base/industrial metals, ease of doing business, rationalised regulatory compliance costs etc.
8.The norms laid down in this Circular shall come into effect from June 01, 2021.
9.The stock exchanges and Clearing Corporations are advised to:
9.1.bring the provisions of this Circular to the notice of the members of the Exchange/Clearing Corporations and also to disseminate the same on their website.
9.2.communicate the status of the implementation of the provisions of this Circular in the Monthly Development Reports to SEBI.
9.3.to make necessary amendments to the relevant bye-laws, rules and regulations.
10.This Circular is issued in exercise of 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.
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