TaxTMI 
TaxTMI 
Design of Commodity Indices and Product Design for Futures on Commodity Indices
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....a subject of deliberation as it is considered to be conducive for the overall development of the commodity derivatives market, attracting broad based participation, enhancing liquidity, facilitating hedging and bringing in more depth to the commodity derivatives market. 2. In this regard, the Commodity Derivatives Advisory Committee (CDAC) of SEBI had inter-alia recommended introduction of options, derivatives on commodity indices and at later stage products such as weather and freight derivatives. SEBI has already permitted commodity options in Indian commodity derivatives markets. Based on the above recommendation of CDAC and comments received on SEBI consultation paper dated January 16, 2019 on design of commodity indices and product ....
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....ed under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 8. Exchanges are advised to: i. make necessary amendments to the relevant bye-laws, rules and regulations. ii. bring the provisions of this circular to the notice of the stock brokers of the Exchange and also to disseminate the same on their website. iii. communicate to SEBI, the status of the implementation of the provisions of this circular 9. This circular is available on SEBI website www.sebi.gov.in under the category "Circulars" and "Info for Commodity Derivatives". Yours faithfully, Vikas Sukh....
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....al and agri-processed commodities ii. INR 500 Crore for all other commodities. (Constituents having at least 80% combined weightage in the index shall meet this criterion and no single constituent not meeting this criterion shall have a weightage of more than 15% in the index) However, the above turnover requirements shall not be applicable for sectoral indices subject to exchanges ensuring that constituent futures have adequate liquidity. 4. Re-balancing: a. The index constituents and their weightages shall be at least annually selected and rebalanced. Exchanges shall decide and announce/disclose the constituents and weightages of the index at least three months before the actual re-balancing of the i....
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....ghtage shall be at least 1%. However, these weightage caps shall not be applicable for sectoral indices subject to exchanges ensuring that any single constituent does not get heavily weighted in an index. c. In case of an index having multiple commodity groups, exchanges may put in place maximum and minimum weightages for a commodity group. 6. Computation and roll over: a. The index value shall ordinarily be computed using the nearest expiry futures prices of the index constituents so that prices of liquid contracts are used for index construction. b. Exchange shall put in place a transparent methodology (including the dates of roll over, the various constituents which will be rolled over from nearest to next e....
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....endar based on market requirements. 5. Position Limits: a. Client level- Higher of: 5% of the total open interest in the market in commodity index futures Or 1000 lots b. Trading Member level- Higher of: 15% of the total open interest in the market in commodity index futures Or 10000 lots 6. Daily Price Limit: Stock Exchanges shall decide appropriate daily price limits for commodity index futures based on historical price movement of the indices. 7. Settlement Mechanism: Final Settlement for futures on commodity index shall be done in cash. 8. Final Settlement Price: The Final Settlement Price shall be the underlying index price arrived at based on Volume Weightage A....