Commodity markets regulator Forward Markets Commission (FMC) has decided to allow hedgers, brokers and investors to take higher positions in futures contracts as part of its efforts to ensure more liquidity in the market.

In order to usher in more transparency in the market, the commission has asked the exchanges to display details of top traders on their websites. The revised norms, issued on Wednesday, have come into effect immediately.

A hedger, who deposits his/her commodity early or pays in early, is exempted from consideration of position limits. Normally, those hedging their positions on the futures market deposit their produce before the contract expires, also called in pay-in. This has always been considered a part of the position limit offered to the hedger by the exchanges. With the latest rule, the pay-in will not be considered part of the position limit.

Also, if a person hedging on the commodity exchange has positions that will square off his or her exposure, then it will be considered as not having any position limit. In short, this means a trader who could have a buy contract for a particular month and a sell contract of the same quality for another month will be treated as having no position.

For considering position limit, an investor’s position will be taken in net and that of a broker in gross. For agricultural produce, the overall position in each exchange will be capped at 50 per cent of the estimated production and imports. The estimates will be derived from agencies and government departments. Till now, such limits had not been considered.

The FMC has also doubled the position limit for brokers to 10 times of their clients’ position limit or 20 per cent of the open interest position across the market, whichever is higher.

Client level position for agricultural produce will be one per cent of the estimated production plus import. The decision on clients’ position will be taken from time to time, including a five per cent limit of the open interest across the market.

Again with regard to farm produce, the client position for a contract nearing delivery will be 50 per cent of his/her overall position in agricultural commodities.

Near-month limit will be reviewed after six months to ensure that it moves to 100 per cent of overall position limits along with growth of liquidity and volume. The FMC will decide on this on a year-to-year basis and display it on the exchanges’ website regularly.

The disclosure on top 10 traders besides the pay-in and pay-out details of the top 10 should be made 10 days after the completion of the settlement, the FMC said.

Exchanges have also been directed to disclose the open interest of top 10 trading clients on buy and sell side without disclosing their names. They have also been asked to give details of the pay-in and pay-out of commodities made by top 10 clients including hedgers on their website 10 days after completion of settlement.

The revised norms have been imposed after the FMC discussed the revision with various stakeholders and put out a policy paper on its website last year for feedback.

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