TaxTMI 
TaxTMI 
Criteria for Eligibility, Retention and re-introduction of derivative contracts on Commodities
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.... usefulness of commencing futures trading in products (not necessarily of just commodities), needs to be ascertained. 2. The Commodity Derivatives Advisory Committee (CDAC), constituted for advising SEBI on matters concerning effective regulation and development of the commodity derivatives market, on the above aspects had inter alia, recommended that: 2.1. The commodities which are to be recommended by SEBI for notification by the Government or on which the exchange proposes to launch a contract should pass through some test based upon the objective parameters and upon satisfaction, should be allowed for trading. 2.2. It is also important that the contracts available for trading in the commodity derivatives market are ....
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....standardized contracts can be traded. • Durable / Storable: The commodity should be durable and storable for better price discovery. Durability i.e. higher shelf life makes commodity conducive for storage, which creates opportunity for cash and carry and hence would attract arbitragers thus make it more suitable for derivatives trading. II. Trade Factors • Global: Global market in a commodity could be a positive indicator as internationally linked commodity prices are influenced by various global factors and thus create multiple reference points for price discovery which may make it conducive for derivatives trading. • Value chain: The term ''value chain'' describes the full range of value add....
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.... • Correlation with International Market: Commodities which have a strong correlation with the global market have higher need for price risk management. Such commodities are conducive for derivatives trading. • Seasonality: The Indian commodity sphere is characterized by seasonality. The prices fluctuate with the supply season and the off season. The derivatives market is necessary to even out this fluctuation and facilitate better price discovery. Thus the commodities with higher seasonality are conducive for derivatives trading. • Price Volatility: Commodities with high volatility of prices have high need for hedging. Such commodities are conducive for Derivatives trading. b) In order to bri....
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....le for derivatives trading due to not satisfying the retention criteria, the exchanges shall not reconsider such commodity for re-launching contract for a minimum period of one year. c) Further, a commodity which is discontinued/suspended by the exchange from derivatives trading on its platform, shall not be re-considered by the concerned exchange for re-launching of derivatives contract on such commodity at least for a minimum period of one year. 4. The provisions of this circular shall come into effect from the date of the circular except for the provisions listed out at 3.3 above which will be effective from April 01, 2017. 5. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities....
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....e commodity can be stored Homogeneous/ Standardization Scope for standardization Parameter I Score Parameter II - Ease of doing Business Particulars Weight Sub-score Details Prevalence of price controls These parameters relates to the ease of doing business in commodity markets. Issues such as price controls, storage controls, Taxation etc., have a bearing on the trade. These parameters are also an indicator of what reforms should be brought in the commodity space in a regulated environment to be best in class globally. Minimum Support Price (MSP) for the commodity Storage controls/ Stock Limits Governme....