TaxTMI 
TaxTMI 
Revised Warehousing Norms in the Commodity Derivatives Market for Agricultural and Agri-processed Commodities Traded on the National Commodity Derivatives Exchanges
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....n the commodity derivatives exchanges. With this objective necessary amendments were carried out by inserting Regulation 44D(2) in Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 ("SECC Regulations"), by providing that every commodity derivatives exchange (in short, exchange) shall ensure guarantee for settlement of trades including good delivery. 2. It is therefore, incumbent upon the commodity derivatives exchanges to have in place comprehensive framework of norms for adherence by the Warehouse Service Providers (WSP), warehouse, assayers and other allied service providers engaged by them so as to exercise a robust mechanism, for ensuring good delivery as mandated under the SECC Regulations. In order to facilitate good delivery by the commodity derivatives exchanges by providing therein with a set of minimum standards and norms for compliance by the accredited warehouses, the existing norms for exchange accredited WSPs, warehouses and assayers have been reviewed. 3. On the basis of various observations inputs/feedback received during visits to different warehouses, meetings held with the WSPs, national commodity derivati....
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....Final Expiry date. The existing accreditation as on the date of the circular would be valid for 3 years from the date of this circular, thereafter would be subject to renewal. B. Eligibility and Experience of WSP/Promoters/Promoter Group of WSP: a) A WSP shall be a corporate body and is in public warehousing business. b) The Promoters/ Promoter Groups of the WSP should be responsible persons/entities of repute with a good business reputation and credibility, and who are in the business of public warehousing for at least 3 years as on the date of their operation and have knowledge of, and experience in, generally accepted warehousing and handling practices for Commodities. The exchange in its discretion, may relax the above norm of 3 years provided that the WSP or its promoter/promoter group: i. Meets all other criteria ii. Submit an undertaking that they shall meet any additional norm specified by exchanges within the time frame as specified by it or 3 years whichever is earlier. c) WSP and Promoters/ Promoter Group of WSP shall have no record of serious violation of laws or being expelled by any Exchange in last three years. The Exchange can take an appropriate under....
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....y statement, b) Security Deposit: The WSP seeking accreditation with an exchange is required to furnish a refundable security deposit along with the application form. i. Such security deposit shall be a minimum amount of `50 lakhs. ii. Security deposit shall not be released until six months after cancellation or revocation or surrender of the accreditation of the WSP or until after satisfaction of every claim against the deposit, whichever is later. iii. Such security deposit shall be in form of cash or cash equivalent like Bank Fixed Deposits, Bank Guarantees etc. c) Financial Security Deposits (FSD): i. The WSP shall furnish FSD in addition to the security deposit as under:- Value of Goods stored FSD Upto ₹250 crores 3% of the aggregate value of stored commodities Above ₹250 crores and upto -₹500 crores 4% of the aggregate value of stored commodities Above ₹500 crores 5% of the aggregate value of stored commodities ii. The FSD shall be in form of liquid assets with applicable haircuts and concentration limits as listed below:- Item Minimum haircut Limits Cash 0 No Limit but minimum 25% Bank Fixed Deposit 0 Bank Guarantees....
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....ate such a warehouse, and do not have any conflict of interest in discharge of their functions. ii. The exchanges shall ensure that the WSP/Management of WSP (defined as 'key managerial personnel' including whole time directors of WSP and their 'relatives' as per Companies Act, 2013) or entities owned or controlled by promoters/management of WSP/Group concerns/associates directly or indirectly or persons 'acting in concert' are not allowed, either directly or indirectly, to trade on the commodity derivatives exchange in the commodity for which it is accredited by Exchange. The exchange shall not provide for any exemption in this regard. iii. The Exchange may obtain an annual declaration from the compliance officer of WSP to the effect that the WSP/Management of WSP or entities owned or controlled by management of WSP/Group concerns directly or indirectly or persons 'acting in concert' have not traded on exchange. iv. The exchange shall ensure that the WSP has adequate number of competent employees at all times who have the experience, capacity and ability of operating the business without any conflict of interest. v. The exchange shall ensure that the staff/employees of the....
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....v. Model warehouse agreement format xvi.Maintenance of surroundings, infrastructure etc. d) The WSP shall have good internal systems and controls which should meet the operating guidelines, if any, issued by the Exchange from time to time. The WSP shall have clear delegation of powers to meet operational requirement. e) A WSP shall intimate / notify in writing to the Exchange, if there is any material change, prior to making such change. f) WSP shall report to the Exchange within three business days of initiation of any civil and criminal proceedings by or against it and shall also intimate the exchange if there is probability of any such legal proceedings being initiated involving it ,as soon as the same comes to the knowledge of the WSP. F. Know Your Depositor: a) The WSP shall comply with Know Your Depositor (KYD) Policy as prescribed by the Exchange from time to time. b) The Exchange and WSP shall at any point of time be able to identify the depositor of the goods deposited in registered warehouses, the owner of the deposited goods (in case the depositor is an agent of the actual owner), and also the actual beneficiary (in case the depositor and the beneficiary are....
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....Exchange commodities. c) WSP shall take utmost care in storing commodities for futures contract in accordance with the climatic conditions and the nature of commodity stored. d) WSP shall have adequate security personnel for each of its registered warehouse with required facilities to immediately communicate any unlawful entry, burglary, theft or damage or potential loss to the deposited goods to the WSP. e) Each warehouse of an accredited WSP shall assign a special place to store the samples used for inspection and testing for purpose of further examination and testing. f) WSPs shall take utmost care on daily basis for keeping surroundings for their respective warehouses under vegetation control and for disposal of waste which can otherwise create a favourable habitat for rodents and other pests. WSP should regularly inspect and verify whether rodent control structures in the warehouse are sound and whether there are any pools of water around the facility, which can increase the danger of water seepage into it, and take appropriate remedial steps. g) The exchanges shall ensure that the warehouses provided by the WSPs are under absolute control of the WSPs. In case a ware....
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....n a daily basis warehouse wise/commodity wise details of the space available, goods deposited and held in transit, details of location of the warehouse, particulars of rejection of the goods etc, on its website and the archives of such reports shall be available on its website. p) The WSP shall not disseminate any information that is false or misleading or disclose any confidential information obtained during the course of their dealings with the exchanges or their positions on the market or as a result of their position or during the course of performance of their duties. I. Accreditation of assayers: a) The exchanges shall follow a transparent process for accreditation of assayers by issue of open advertisement in leading newspapers and by putting up the same on the exchange website. The process being followed for such accreditation shall be displayed on the website of the Exchange in advance. The accreditation shall be done with the approval of the Risk Management Committee of the Board of Directors of the Exchange. b) The Exchange shall conduct independent pre-empanelment due diligence of Assayers by visiting the laboratories and assessing the testing and certification f....
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....and allied perils including flood, cyclone, earthquake and spontaneous combustion, Burglary and Theft and special perils covering riots, strikes and terrorism. c) The WSP shall take Fidelity guarantee & crime insurance and Professional indemnity cover to cover all deliverable stocks on the exchange. d) The value of goods to be insured should be marked to market on replacement value on ongoing basis. L. Monitoring/Inspection/Audit of warehouses by WSPs and Exchanges: a) Periodic inspection/audit by WSPs: The WSP should ensure that there is periodic inspection/audit of the warehouse as well as the commodities stored in the warehouses. i. Inspection staff must be independent of the employees / staff deputed at the registered warehouse. ii. The inspection/audit report is submitted to the Exchange within a week of the completion of such inspection/audit. iii. The Exchange shall ensure that the physical counting of stocks and their reconciliation with the corresponding electronic records is done periodically. b) The WSP shall allow the members /clients holding electronic credit balances to do physical inspection of their goods. However, the request for such physical inspec....
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....ry date is over, are removed from the concerned warehouse immediately, but not later than 3 months from the date of the final expiry date. M. Review of WSPs/warehouses: a) The Exchange shall review and appraise operational performance of each WSP every year. Based on the operational review the Exchange may adjust the allocation of commodities and the limit of deliveries at various warehouses of the concerned WSP in accordance with the results of such performance evaluation and appraisal. b) Additionally, the Exchange may carry out biennial and quarterly performance review of all warehouses accredited by it, taking into account various performance areas such as storage facilities, the capacity and appearance of the warehouse, business capabilities, business performance, accounting, the satisfaction level of members/clients, redressal of client grievances, and other factors as the Exchange may deem necessary for its review. c) The exchange may take necessary action against as mentioned in para S against a WSP/warehouse, if the warehouse is unable to meet the requirements of an accredited warehouse and fails to improve the standard within the stipulated time. N. Code of conduc....
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....or surrender of its accreditation shall submit its Application for Surrender to the Exchange for evaluation and approval. b) The exchange may cancel the accreditations a WSP if it fails to comply with the provisions of the rules/regulations specified by it and intimate the same to the market participants through circular. Further, the exchange shall put in place a cancellation policy for WSP in public domain. However, the exchange shall offer the WSP concerned an opportunity of being heard and take a decision on cancellation after considering the explanation of the WSP. c) A WSP that surrenders its accreditation or its accreditation is cancelled, shall attend to the following matters urgently: i. All commodities for futures contract delivery shall be dispatched out of the warehouse or converted to physical commodities; ii. All liabilities and debts vis-a-vis the Exchange , Member and Clients shall be settled; iii. There is no obligation on its part to deliver goods to the clients pertaining to their trades on the exchange platform, and iv. No customer complaints pertaining to any of its registered warehouses are pending for redressal. d) SD and FSD shall be returned i....
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....rt of its warehouses that prevents the buyer or seller from exercising, in whole or in part, their rights. The Exchange shall compensate the aggrieved client for any such losses that have been appropriately established by debiting the FSD of WSP held with the exchange, in accordance with its applicable rules, and WSP shall within 7 days replenish the FSD as required. T. Cold Storages: In case of any commodity which generally require storage in the cold storages, the exchanges shall ensure that such commodities are stored in cold storages only. U. Status report: a) The Exchanges shall upload a status report on their websites by 5th of every month giving the details of the number of applications received for accreditation of warehouses, Warehouses registered with WDRA during the month, registration pending with WDRA, warehouses pending with Inspecting Agencies, accreditation/registration of warehouses rejected by Exchange/WDRA with reason for the same, etc. b) The archives of such reports shall be available on the exchange website. 5. The exchanges shall put in place necessary arrangements for ensuring compliance with the provisions of the Regulation 44D(2) of SECC Regulation....