MCX to impose concentration margin to combat price rigging

Our Bureau Mumbai | Updated on January 15, 2018

As part of its measures to strengthen the risk management framework, MCX has levied concentration margin on contracts with open interest of over ₹250 crore. It will be applicable from December 1 at the contract level, said MCX, the country’s largest commodity exchange.

Commodity market regulator SEBI has raised apprehension over few members taking huge positions in a particular commodity to raise its prices artificially.

Cornering of stock in the commodity futures market will become a costly proposition with levy of the new margin, said an analyst.

The clearing member’s open interest in the contract shall be compared with the market wide open interest of the commodity contract for calculation of concentration margin, said MCX in a statement on Friday.

Once a contract reaches the threshold limit of ₹250 crore, Clearing Member will be levied a concentration margin of one per cent if his open interest is between 20-25 per cent of the total open interest of the particular contract, said the exchange.

Similarly, clearing Member has to pay two per cent margin if his open interest exceeds 25 per cent of the contract's overall open interest.

The concentration margin will be levied only on incremental open interest and would not be applicable during tender period of the contract, said MCX.

The open interest on both buy and sell of the clearing member's clients will be added to determine gross open interest of clearing member and levy of concentration margin.

The concentration margin will be over and above all other margins as may be applicable, it added.

It will be calculated at the end of the day and be applicable till the end of next trading day. The margins will remain blocked from the available collateral deposits of the member, said MCX.

Published on November 18, 2016

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