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Sebi sets up task force to review existing risk management norms

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Capital markets regulator Sebi has set up a task force to review the existing risk management norms for national level commodity bourses following the suspension of futures trading for castor seed on NCDEX.

“After recent developments witnessed in castor seed futures contracts, Sebi has established a task force to relook at the existing norms related to risk management, delivery mechanism and other related issues,” said a source.

The task force has been asked to submit the report in three weeks. Based on the report, the risk management norms for national level commodity derivatives exchanges will be further tightened, sources said.

In October, Sebi had laid down a comprehensive risk management framework for commodity derivatives exchange. It includes norms for margins, deposits, types of collateral, collateral haircut, concentration limits and risk reduction mode. The exchanges have also been directed segregate their regulatory department from other departments.

The recent development in castor seed contracts and reports of high volatility in other commodities like turmeric and coriander has forced the Sebi to set up a task force to see if risk management norms can be further tightened.

On January 27, NCDEX had suspended futures trading in all castor seeds contracts after it found the open interest positions for the next month contracts to be high and the prices low. This is for the first time the exchange has suspended trading in a commodity when prices are falling.

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