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Sebi lays framework for selection of location as delivery centre for commodity derivatives contract

Sebi lays framework for selection of location as delivery centre for commodity derivatives contract

Markets regulator Sebi on Tuesday issued uniform guidelines to be followed by stock exchanges while identifying and selecting a location as a delivery centre for commodity derivatives contracts.

The decision has been taken based on the recommendations of Commodity Derivatives Advisory Committee (CDAC) and in consultation with the stock exchanges.

A particular location can be identified and selected as a delivery centre by a stock exchange based on demand-supply dynamics, liquidity of the contract, value chain participants, infrastructure support and trade feedback, the regulator said in a circular.

Sebi said that delivery centre, whether basis or additional, plays an important role in the pricing and settlement of the physically delivered commodity derivatives contract. The choice of delivery centre is of vital importance to help the buyers/sellers in taking informed decisions about taking or giving deliveries.

In the absence of a well-defined laid down criteria for identification and selection of a location as a delivery centre, it has been observed that each stock exchange has adopted different criteria for different commodities as per their internal policy decision, it added.

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