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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.... of the futures contact, including good delivery on 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 hel....
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....ll continue to be responsible for the commodities stored till their 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 viol....
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....o be required to file its unaudited quarterly financial statements for all the quarters of a financial years to the exchange, within 45 calendar days of the date of a quarterly 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 Rs.250 crores 3% of the aggregate value of stored commodities Above Rs.250 crores and upto -Rs.500 crores 4% of the aggregate value of stored commodities Above Rs.500 crores 5% of the aggregate value of stored commodities ii. The FSD....
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....WSP has a professional management team to oversee its functioning and operations. i. The exchange shall ensure that the Key Management Personnel (KMPs) of WSP have adequate knowledge of, and experience in generally accepted warehousing and handling practices for Commodities, and are competent and willing to operate 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 indi....
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....edure for internal verification of stock, xi. Preservations of Stock - maintenance of godown hygiene, maintenance of warehouse structure, aeration, periodical examination of goods, classification of presence of insects, pre-monsoon precautions etc. xii. Selection of Location for offering warehousing services xiii. Grievance redressal procedures xiv.Role and responsibilities of employees (including outsourced employees) xv. 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 ,....
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.... by the Exchange; vi. are free from materials and substances that may adversely affect the quality of stored commodities; vii. have a safe work environment; viii. have ensured adequate security as prescribed by the Exchange for protection of stored or handled commodities to prevent from tampering or adulteration; ix. have facilities for storing the deliverable commodities of futures contracts which need to be and piled properly in a separate storage area as specified by the Exchange thereby providing clear-cut demarcation between Exchange / non- 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. ....
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....e that the WSPs have in place, necessary policies, control and system in place for dealing with the risk that may be arising due to the warehouses being used for purposes other than commodity derivatives market. n) The exchange and WSP shall be responsible to accept the goods/commodities in warehouses which meets the quantity and quality parameters as per the exchange contract specifications. The WSP shall take necessary steps to maintain the quality and quantity of goods stored in the warehouse, in accordance with the conditions/parameters (for maintaining the quality) as laid down by the exchanges for each of such commodity. o) The WSP shall display on 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 ....
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....ne warehouse at each of the delivery centres (as specified in the contract specification) at the time of launch of contract itself and address of such warehouses shall be mentioned in the contract specifications. c) The exchanges may accredit warehouses of a WSP within 100 kms radius of the delivery centres depending on the feasibility and requirements, in respect of all commodities. K. Insurance: a) The WSP shall at all times ensure to fully cover under insurance, the value of goods stored at exchange approved warehouses against all potential perils relevant to the commodities for which insurance cover is available and necessary. b) The WSP shall undertake to take insurance cover for risks such as viz. Fire 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/Aud....
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....of rotation of such independent expert agencies for carrying out inspection after every 3 years with a provision for 'cooling off' period of 1 year. vii. The exchange shall have a detailed inspection manual for carrying out the audits and inspections of the WSP/warehouses concerned. d) Monitoring of warehouses by exchange: The exchanges shall be responsible for the monitoring the warehouses of their accredited WSPs. In this regard : i. Norms relating to the monitoring of warehouses shall be placed in public domain. ii. A deliberation on the continuous functioning, monitoring and compliance of norms by WSPs, warehouse and assayers shall be a mandatory agenda item in all Board meetings as well as the Risk management committee meeting of the exchange. iii. The Exchange and WSPs shall ensure that the goods whose final expiry 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 m....
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.... independent assayers, if any, attached to the warehouse etc, on its website. The archives of such reports shall be available on the exchange website. c) The participants/clients willing to deposit goods in Exchange accredited Warehouses would submit a request to the Exchange. The Exchange shall use a transparent and time-bound process for the participants to identify the warehouse where the participants can deposit the goods. After such identification, the Exchange shall intimate the participants about the time, place and the warehouse where they can deposit the goods. The Exchange shall then issue directions to the concerned warehouse for accepting deposits from the concerned participants/clients after assaying/ quality testing as per the laid down procedure in a transparent manner. The WSP shall accept the goods for deposits only at the instruction of Exchange concerned. Q. Surrender/Cancellation of accreditation: a) Any WSP that applies for 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 provision....
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.... warehouse or, in serious cases of misconduct/malfeasance, revoke the accreditation of the concerned warehouse or/and hold the WSP accountable for any legal liabilities, if the concerned erring WSP/ warehouse engages in any of the following offences: • refuses to accept delivery without any bonafide reasons or, issues a falsified certificate of delivery; • violates any of the Exchange's rules or limits the movement of a deliverable commodity into or out of the warehouse; • discloses any confidential business information relating to a buyer or seller or a futures contract; • provide inaccurate or incomplete information, conceal the truth of the facts; • engages in the futures trading activities; or • engages in any other behaviour in breach of the Exchange's rules; or • any other offence not listed above. However, the above actions may be initiated only after taking due approval from the Risk management Committee. b) The accredited WSP shall be liable for any losses resulting from any action or inaction on its part or on the part of its warehouses that prevents the buyer or s....