Sebi Revises Commodity Position Limits & Caps Penalties

New Delhi, Sep 9 (PTI) Market regulator Sebi on Wednesday overhauled position limits for clients in agricultural commodity derivatives and put a ceiling on penalties for violations to facilitate ease of doing business.

Under the new rules, Sebi will calculate penalties for breaches of client-level position limits based on the extent of the excess position and the number of days the violation persists, according to its circular.

The move comes after Sebi received representations to review the position limit norms applicable for agri commodity derivatives, as the current position limits were introduced in 2017, aligned with market conditions prevailing at that time.

As per the circular, for violations of more than 2 per cent of the prescribed limit, the penalty will be the excess position multiplied by the closing price, number of days of violation and 2 per cent, or Rs 2 lakh, whichever is lower.

For violations of up to 2 per cent, the penalty will be calculated similarly, subject to a cap of Rs 10,000.


Sebi said members will have to bring excess positions within prescribed limits by the next trading day. If the violation continues, exchanges can square off the excess position without further notice.

The regulator has also revised the definition of a "Broad Commodity". An agricultural commodity will now qualify as a broad commodity if it is not classified as a sensitive commodity and has an average deliverable supply over the past five years of at least 10 lakh metric tonnes or Rs 5,000 crore in monetary terms.

Under the revised framework, client-level position limits will be 2 per cent of deliverable supply for broad commodities, 1 per cent for narrow commodities and 0.5 per cent for sensitive commodities, Sebi said.

Commodities moving from the narrow to broad category following the revised definition will retain the 1 per cent limit for one year. Exchanges may subsequently raise the limit to 2 per cent after a review.

The revised norms will come into force with immediate effect, Sebi said.