MASTER CIRCULAR FOR COMMODITY DERIVATIVES SEGMENT

4 · 1.anything done or any action taken or purported to have been done or taken under the rescinded circulars, including registrations or approvals granted fees collected, registration suspended or cancelled, any inspection or investigation or enquiry or adjudication commenced or show-cause notice issued prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular,

4 · 2.any application made to SEBI under the rescinded circulars, prior to such rescission, and pending before it shall be deemed to have been made under the corresponding provisions of this Master Circular

4 · 3.the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the rescinded circulars, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the rescinded circulars have never been rescinded .

1 · 1. Trading Hours and Holidays 1

1 · 1.1. Trading Hours

1 · 1.2. Trading Holidays

1 · SEBI Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2016/75 dated August 30, 2016

2 · SEBI circular no. SEBI/HO/CDMRD/DMP/CIR/P/2018/146 dated November 30, 2018

1881 · and also taking into consideration Central/State/Local holidays and notify the same to the market well in advance under prior intimation to SEBI.

1 · 2. Transaction Charges 3

1 · 2.1. The stock exchanges collect transaction charges from the members for the trades executed on their trading platform. In order to promote competition in the market and bring in greater efficiencies and lower transaction costs to market participants, following norms shall be applicable while levying transaction charges-

3 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/82 dated September 07, 2016

4 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2018/1 dated January 03, 2018

1 · 2.2. While revising the transaction charges, the stock exchanges shall ensure that its systems are capable of handling the additional load and that the revising of transaction charges:

1 · 3. Spot Price Polling 5

1 · 3.1. The stock exchanges have been using a 'Spot Price Polling Mechanism' to arrive at the prevailing spot prices. Transparent discovery of spot prices is a critical factor in smooth running of futures market as the same are used as reference prices for settlement of contracts traded on the stock exchange platform. To arrive at the prevailing spot prices, the stock exchanges are polling the spot prices from various spot price polling participants. Some stock exchanges undertake this activity themselves whereas some have outsourced this work to an external agency.

1 · 3.2. In order to maintain the transparency of spot price polling process and dissemination of spot prices arrived at through spot price polling process, the stock exchanges shall:

5 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/78 dated September 02, 2016

1 · 4. Unique Client Code (UCC) and Mandatory Requirement of Permanent Account Number 6

1 · 4.1. It shall be mandatory for the members of the stock exchanges to use Unique Client Code ( " UCC " ) for all clients. The stock exchanges shall not allow execution of trades without uploading of the UCC details by the members of the stock exchange. For this purpose, members shall collect after verifying the authenticity and maintain in their back office the copies of Permanent Account Number ( " PAN " ) issued by the Income Tax (IT) Department, for all their clients. However, in case of e-PAN, members shall verify the authenticity of e-PAN with the details on the website of IT Department and maintain the soft copy of PAN in their records.7

1 · 4.2. PAN shall be the sole identification number and mandatory for all entities/persons who are desirous of transacting on the stock exchanges.

1 · 4.3. 8The stock exchanges shall ensure that their members shall:

6 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/87 dated September 16, 2017

7 · SEBI circular no. SEBI/HO/CDMRD/DNP/CIR/P/2021/30 dated March 08, 2021.

8 · SEBI circular no. SEBI/HO/CDMRD/DNP/CIR/P/2021/30 dated March 08, 2021

1 · 4.4. The member shall also be required to furnish the above particulars of their clients to the stock exchanges and the same shall be updated on a monthly basis. Such information for a specific month should reach the stock exchanges within 7 working days of the following month.

1 · 4.5. The stock exchanges shall impose penalty on the member at the rate of 1% of the value of every trade that has been carried out by the member without uploading the UCC details of the clients. The penalty so collected by the stock exchanges shall be transferred to the Investor Protection Fund ( " IPF " ) of that stock exchange. Further, the member shall be liable to be suspended if the client details are not uploaded within a month of the trade.

1 · 4.6. The stock exchanges shall be required to maintain a database of client details submitted by its members. Historical records of all such submissions shall be maintained for a period of 7 years by the stock exchange.

1 · 5. Modification of Client Codes Post Execution of Trades 9

1 · 5.1. The stock exchanges may allow modifications of client codes of noninstitutional trades only to rectify a genuine error in entry of client code at the time of placing/ modifying the related order in all segments. It is also re-emphasized here that this facility is expected to be used more as an exception rather than a routine. 10

1 · 5.2. For this purpose, the following shall be classified as genuine errors:

9 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/73 dated August 19, 2016

10 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/43 dated March 29, 2016

1 · 5.3. Error Account

1 · 5.4. If stock exchange wishes to allow its members to modify client codes of non -institutional trades, it shall

1 · 5.5. Waiver of Penalty

1 · 6. Disclosure of Proprietary Trading by Broker to Client 11

1 · 6.1. With a view to increase the transparency in the dealings between the stock broker and the client, every stock broker shall disclose to his client whether he does client based business or proprietary trading as well.

1 · 6.2. The stock broker shall disclose this information upfront to his new clients at the time of entering into the KYC agreement.

1 · 6.3. In case of a stock broker who at present does not trade on proprietary account, chooses to do so at a later date, he shall be required to disclose this to his clients before carrying out any proprietary trading.

1 · 7. "Pro – account" Trading Terminals 12

1 · 7.1. Facility of placing orders on "pro-account" through trading terminals shall be extended only at one location of the members as specified / required by the members .

1 · 7.2. Trading terminals located at places other than the above location shall have a facility to place orders only for and on behalf of a client by entering client code details as required / specified by the stock exchange / SEBI.

1 · 7.3. In case any member requires the facility of using "pro-account" through trading terminals from more than one location, such member shall be required to submit an undertaking to the stock exchange stating the reason for using the "pro-account" at multiple locations and the stock exchange may, on case to case basis after due diligence, consider extending the facility of allowing use of "proaccount" from more than one location.

1 · 7.4. Stock exchanges shall take necessary disciplinary action wherever such facility is being misused by any of its member.

11 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/49 dated April 25, 2016

12 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/49 dated April 25, 2016

1 · 8. Sharing of Information in Case of Declaration of Member as Defaulter in case of Multiple Membership 13

1 · 8.1. Whenever a member of any segment is declared defaulter, the concerned stock exchange/clearing corporation shall immediately declare it a defaulter in all its segments. It shall also immediately inform all other stock exchanges/clearing corporations the details of the defaulter member such as name of the member, the names of the proprietors/ partners/ promoters/ dominant shareholders, as applicable.

1 · 8.2. Immediately on receipt of the information about default of a member, the other stock exchange / clearing corporation shall declare the said member defaulter on all its segments.

1 · 8.3. The stock exchanges / clearing corporations shall take appropriate action against the associates of defaulter member. For this purpose, the term 'associate' shall include a person:

13 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/102 dated September 27, 2016

1 · 9. Liquidity Enhancement Scheme (LES) 14

1 · 9.1. The stock exchanges may introduce Liquidity Enhancement Scheme ("LES") in commodity derivatives segment subject to the following:

1 · 9.2. The stock exchange shall formulate its own benchmarks for selecting the commodity derivative product for liquidity enhancement with the broad objective of enhancing liquidity in illiquid securities.

14 · SEBI circular no SEBI/HO/CDMRD/DRMP/CIR/P/2018/55 dated March 26, 2018

1 · 9.3. The incentives under LES shall be transparent and measurable, and may take either of the following:

1 · 9.4. Any stock exchange , in early years of its formation /commencement of business , may not be able to generate profits or have free reserves from business operations. In this regard, such stock exchanges are exempted, during their first five years of operation from the date of SEBI's approval for commencement/recommencement of their business, from the applicability of abovementioned para (clauses given in 1.9.3 above) 15 subject to adherence to the following conditions:

15 · SEBI Circular No SEBI/HO/CDMRD/DNPMP/CIR/P/2019/84 dated July 26, 2019

1 · 9.5. Market integrity - The stock exchange shall ensure the following:

1 · 9.6. Market maker / liquidity enhancer The stock exchange shall prescribe and monitor the obligations of liquidity enhancers (liquidity provider, market-maker, maker-taker or by whatever name called)

1 · 9.7. For the present, schemes which incentivize brokers based on activation of new UCC, number of trades or open interest shall not be permissible under LES.

1 · 10. Framework for Utilization of Regulatory Fee Forgone by SEBI 16

1 · 10.1. With a view to encourage the participation by Farmers/Farmer Producer Organizations ( " FPOs " ) in agricultural commodity derivatives markets, SEBI has reduced the regulatory fee on stock exchanges with respect to turnover in agricultural commodity derivatives. The objective was to reduce the cost burden on Farmers/FPOs from the amount saved by the stock exchanges due to reduction of regulatory fee.

1 · 10.2. In order to pass on the desired benefits from reduction of regulatory fees on agricultural commodity derivatives, the stock exchanges dealing with agricultural commodity derivatives shall create a separate fund earmarked for the benefit of Farmers/FPOs in which, the regulatory fee forgone by SEBI shall be deposited and utilized exclusively for the benefit of and easy participation by Farmers and FPOs in the agri-commodity derivatives market. Any income on investments from the fund shall also be ploughed back into the same fund.

1 · 10.3. In this regard, the stock exchanges shall follow the guiding principles outlined below for the purpose of utilization of the earmarked fund –

16 · SEBI circular no SEBI/HO/CDMRD/DMP/IR/P/2019/40 dated March 20, 2019

1 · 10.4. While preparing the action plan for a financial year, the stock exchanges may consider one or more of the following activities for utilization of the fund for benefit of farmers/FPOs –

20 · Reimbursement of fees levied by Clearing Corporation: Fees/cost levied by Clearing Corporation, if any, on farmers/FPOs in the process of their participation in commodity derivatives trading may be reimbursed .

1 · 10.5. The stock exchanges shall allow utilization of the fund for the activities mentioned above with certain conditions such as overall amount per activity, maximum amount per farmer/FPO, maximum period etc., as may be applicable from time to time, so as to ensure fair and equitable distribution of benefit to farmers/FPOs.

1 · 10.6. 21Further, in order to enhance transparency, the stock exchanges are advised to make disclosure regarding the corpus of the fund and its utilization, on their website, on a monthly basis.

17 · SEBI Circular No . SEBI/HO/CDMRD/DNPMP/CIR/P/2020/206 dated October 19, 2020

18 · I SEBI Circular No . SEBI/HO/CDMRD/DNPMP/CIR/P/2020/206 dated October 19, 2020

19 · SEBI Circular No . SEBI/HO/CDMRD/DNPMP/CIR/P/2020/206 dated October 19, 2020

20 · SEBI Circular No . SEBI/HO/CDMRD/DNPMP/CIR/P/2020/206 dated October 19, 2020

21 · SEBI Circular No . SEBI/HO/CDMRD/DNPMP/CIR/P/2020/206 dated October 19, 2020

1 · 10.7. The stock exchanges are further advised to include the details of the corpus of the fund and its utilization in the Monthly Development Report ( " MDR " ).

1 · 11. Price Dissemination through SMS / Electronic Communication Facility2 y22

1 · 11.1. Exchanges shall make efforts for registration of subscribers of Price Dissemination services and disseminate derivatives prices to them on a daily basis. Such direct price dissemination service would provide information to subscribers instantly in an efficient and transparent manner and thus shall be of great benefit to market participants.

1 · 11.2. The Exchanges may provide price dissemination through SMS or any other electronic communication facility (instant messengers, email etc.) for all commodities.

1 · 11.3. The service is to be provided free of cost to the subscribers. However, the expenditure incurred for such price dissemination may be reimbursed from the interest accrued on the IPF .

1 · 12. Programmes Sponsored by the Exchanges through Media Channels 23

1 · 12.1. The stock exchanges being neutral platforms, either as an institution or through their functionaries, shall not sponsor or associate themselves in any manner with programmes/seminars/workshops/ activities etc. at various fora including but not limited to TV/Radio/Social Networks/Websites or any other media in which the discussions/suggestions are related to the price behaviour, price outlook, trading strategy, buy/sell recommendations, or similar subjects related to commodity derivatives.

1 · 12.2. The stock exchanges shall also ensure that their staff members are not associated with such activities as mentioned above. The stock exchanges shall lay down a suitable code of conduct for their executives and other staff members in this regard.

22 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/76 dated August 30, 2016

23 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/72 dated August 19, 2016

1 · 13. Maintenance and Preservation of Records24

1 · 13.1. In terms of Rules 14 and 15 of Securities Contract (Regulation) Rules, 1957 ("SCRR " ), every recognized stock exchange and its members are required to maintain and preserve the specified books of account and documents for a period ranging from two years to five years. Further, as per regulation 18 of the Securities and Exchange Board of India (Stock Brokers) Regulations, 1992 ("Stock Broker Regulations"), every stock broker shall preserve the specified books of account and other records for a minimum period of five years. In case such documents are maintained in electronic form, provisions of the Information Technology Act, 2000 in this regard shall be complied with.

1 · 13.2. Further, it has been noticed that enforcement agencies like the Central Bureau of Investigation ("CBI"), Police, Crime Branch etc. have been collecting copies of the various records/documents during the course of their investigation. The originals of such documents maintained either in physical or in electronic form or in both would be required by such enforcement agencies during trial of the case also.

1 · 13.3. In view of the above it is clarified that if a copy is taken by such enforcement agency either from physical or electronic record then the respective original is to be maintained till the trial or investigation proceedings have concluded.

1 · 14. Forward Segment2 t25

1 · 14.1. Participants in Forward Segment are not allowed to enter into fresh contracts.

1 · 15. Disclosure Requirements for stock exchanges on their websites 26

1 · 15.1. In order to promote transparency in the markets, the stock exchanges shall make following disclosures on their website:

24 · SEBI Circular No. SEBI/HO/CDMRD/DMP/CIR/P/2016/74 dated August 30, 2016

25 · SEBI Circular no. CIR/CDMRD/DMP/2/2016 dated January 15, 2016

26 · SEBI circular no SEBI/HO/CDMRD/DMP/2016/101 dated September 27, 2016

1 · 15.2. Disclosure of suspended /expelled /defaulter members: The stock exchanges which are suspending/expelling/declaring defaulter their members for irregularities/violation of regulatory measures and other various reasons, shall disclose following information on their website -

1 · 15.3. Disclosure of disablement of member terminals 27: The disablement of terminals of the members along with duration of disablement due to shortage of funds, margin money etc., shall be disclosed by the stock exchange on its website at the end of every quarter i.e., 30th June, 30th September, 31st December and 31st March.

1 · 15.4. Category-wise disclosure of Open Interest and turnover: All stock exchanges shall also make additional disclosures on their websites (as per the format at Annexure C on format for disclosure of Open Interest (OI) and turnover for various categories of market participants at individual commodity as well as overall market level and at Annexure D on commodity wise format of disclosure for top participants, members and market wide position limits ) 28 . The Annexure on format for disclosure of Open Interest ( " OI " ) and turnover for various categories of market participants at individual commodity contains a disclosure format for OI and turnover for various categories of participants at Commodity as well as market level. While the Annexure D on Commodity wise format of disclosure for top participants, members and market wide position limits contains commodity wise format of disclosure for top participants, members and market wide position limits. In this regard the stock exchanges shall:

27 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/93 dated 26 September 2016

28 · SEBI Circular no SEBI/HO/CDMRD/DNPMP/CIR/P/2019/08 dated January 04, 2019

1 · 16. Disclosures regarding commodity risks by listed entities 29

1 · 16.1. Regulation 34(3) read with clause 9(n) of Part C of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI LODR Regulations") mandates listed entities to make disclosures regarding commodity price risk and hedging activities in the

29 · SEBI Circular no SEBI/HO/CFD/CMD1/CIR/P/2018/141dated November 15, 2018

1 · 16.2. In order to benefit the shareholders and to bring further clarity in disclosures to be made in the annual reports by listed entities, all listed entities shall make the disclosures in the format as per the Annexure E on Disclosures regarding commodity risks by listed entities as part of the Corporate Governance Report in the Annual Report under clause 9(n) of Part C of Schedule V of the SEBI LODR Regulations .

2 · 1. Goods notified under SCRA30

2 · 1.1. Pursuant to the repeal of the Forward Contracts (Regulation) Act, 1952 ( " FCRA " ) and amendment to the Securities Contracts (Regulation) Act, 1956 ( " SCRA " ), the Central Government, in exercise of the powers conferred by clause (bc) of section 2 of the SCRA and in consultation with the SEBI, have vide Notification No. S.O. 3068(E) dated September 27, 2016 notified the goods specified therein, for the purpose of clause (bc) of section 2 of the SCRA with effect from the date of the said notification.

2 · 1.2. As specified in the aforesaid Gazette notification, list of notified goods are at Annexure F on Goods notified u/s 2(bc) of SCRA .

2 · 2. Criteria for Eligibility, Retention and Re-introduction of Derivative Contracts on Commodities 31

2 · 2.1. The commodities which are to be recommended by SEBI for notification by the Government or on which the stock exchange proposes to launch a contract should pass through some test based upon the objective parameters and upon satisfaction, should be allowed for trading. It is also important that the contracts available for trading in the commodity derivatives market are liquid enough for the contracts to trade smoothly.

2 · 2.2. The following criteria for eligibility, retention and re-introduction of derivative contracts on commodities shall be followed by all the stock exchanges.

2 · 2.3. Eligibility criteria for allowing derivative contracts on commodities: Stock Exchanges shall examine following basic parameters and the commodity may be permitted to be included under derivatives if such commodity satisfies these parameters.

30 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/105 dated September 28, 2016

31 · SEBI circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/6 dated January 20, 2017

2 · 2.4. Applicability of the template on the commodities presently being traded

2 · 2.5. Criteria for retention and reintroduction of derivative contracts on commodities

2 · 3. Role of Regulatory Oversight Committee regarding Product Design 32

2 · 3.1. The Regulatory Oversight Committee of the stock exchanges is one of the mandatory oversight committee of the Governing Board of the stock exchange. The functions of Regulatory Oversight Committee with respect to the "Product Design" is as under-

2 · 3.2. The head(s) of department(s) handling above matters shall report directly to the Regulatory Oversight Committee and also to the Managing Director. Any action against the head(s) of department shall be subject to an appeal to the Regulatory Oversight Committee, within such period as may be determined by the Governing Board.

2 · 4. Product Advisory Committee 33

2 · 4.1. Each stock exchange shall constitute a Product Advisory Committee ( " PAC " ) for each group/complex of commodities having common stakeholders/value chain participants, on which derivatives are traded or being proposed to be traded on the stock exchange.

2 · 4.2. Terms of Reference: The PAC shall be consulted for the following:

32 · SEBI circular no. SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/13 dated January 10, 2019.

33 · SEBI circular no SEBI/HO/CDMRD/DNPMP/CIR/P/2019/89 dated August 07, 2019

2 · 4.3. Composition

2 · 4.4. Proceeding of meetings

2 · 4.5. Disclosure: For each PAC, the stock exchange shall make following disclosures on its website:

2 · 4.6. Confidentiality and Conflicts of Interest

2 · 4.7. There should be an annual review of the PAC's performance by the Regulatory Oversight Committee of the Stock Exchange.

2 · 5. Performance Review of the Commodity Derivatives Contracts 34

2 · 5.1. All stock exchanges shall review the performance of all contracts traded on their platform (as per the parameters illustrated in Annexure H on Parameters for Performance Review of Commodity Derivative Contract).

2 · 5.2. The said performance review shall be consulted with the PAC.

2 · 5.3. The said performance review along with the methodology adopted in evaluation, if any, shall be disclosed by the stock exchanges on their website prominently.

2 · 5.4. The said performance review shall be conducted on an annual basis for each financial year and shall be disclosed by 30 th June of the following financial year.

34 · SEBI circular no SEBI/HO/CDMRD/DNPMP/CIR/P/2020/21 dated February 04,2020

3 · 1. General guidelines for Daily Price Limit3 t35

3 · 1.1. Base price for DPL: The base price for fixing the Daily Price Limit ("DPL") slabs shall be the previous day's closing price of the underlying contract on the respective stock exchange.

3 · 1.2. Order Acceptance: The stock exchanges shall ensure that their system should only accept those orders which are within the relevant prescribed slab at any point of time.

3 · 1.3. Breach of slab: A breach of slab shall be considered when trading in a contract is executed at the upper or lower band of the prescribed slab.

3 · 1.4. DPL on First Trading Day of the Contract

35 · SEBI Circular no. SEBI/HO/CDMRD/DNPMP/CIR/P/2021/9 dated January 11, 2021.

3 · 1.5. Calculation of closing price or Daily Settlement Price

3 · 1.6. For any commodity futures contracts, the stock exchange at its discretion may prescribe DPL narrower than the slabs prescribed based upon reasons including analysis of price movements, finding pertaining to surveillance etc.

3 · 2. DPL for Commodity futures contracts which are based on agricultural and agri-processed goods 36

3 · 2.1. The DPL for commodity futures contracts based on agricultural and agri-processed goods is as under:

36 · SEBI Circular no. SEBI/HO/CDMRD/DNPMP/CIR/P/2021/9 dated January 11, 2021 .

3 · 2.2. Once the initial slab limit is breached in any contract, then, after a cooling-off period of 15 minutes, this limit shall be increased further by enhanced slab, only in that contract.

3 · 2.3. During the cooling-off period of 15 minutes, the trading shall be permitted, within the initial slab limit.

3 · 2.4. After the DPL is enhanced, trading shall be permitted throughout the day within the enhanced Aggregate DPL.

3 · 3. DPL for Commodity futures contracts which are based on nonagricultural goods 37

3 · 3.1. Following slabs shall be applied for DPL on futures contracts based on non-agricultural goods:

3 · 3.2. Once the initial slab limit is breached in any contract, the DPL for that contract shall be relaxed further by the 'Enhanced Slab' after the cooling off period of 15 minutes in the trading.

3 · 3.3. During the cooling off period trading shall continue to be permitted within the previous slab of DPL.

37 · SEBI Circular no. SEBI/HO/CDMRD/DNPMP/CIR/P/2021/9 dated January 11, 2021 .

3 · 3.4. In case the price movement in the international markets is more than the aggregate DPL or if international price is beyond aggregate DPL range (after appropriate currency conversion) when compared with closing price on previous day on domestic exchange, the same maybe further relaxed in stages of 3% by the Exchange with cooling off period of 15 minutes. For such instances, the Stock Exchanges shall give appropriate notice to the market along with all the relevant details and justification for the same." 38

3 · 3.5. Only in the event of exceptional circumstances, where there is extreme price movement, beyond the initial slab of the DPL, in the international markets, during trading hours or after the closure of trading on domestic exchanges, the stock exchanges can relax the DPL directly by the required level, by giving appropriate notice to the market, as per para 3.3.4 above." 39

3 · 3.6. The stock exchanges shall inform SEBI of all such instances of relaxation of DPL pursuant to Para 3.3.4 and Para 3.3.5 above, under Para 10 of Section I in the Monthly Development Report being submitted to SEBI .

3 · 3.7. It is clarified that breach of slab is not essential for implementation of the Clause 3.3.4 and 3.3.5 above of this Master Circular.

3 · 4. General guidelines for Position Limits 40

3 · 4.1. The following norms shall be applicable to the agricultural as well as non- agricultural commodity derivatives at commodity level:

38 · SEBI Circular SEBI/HO/MRD/MRD -PoD -1/P/CIR/2022/128 dated September 27, 2022.

39 · SEBI Circular SEBI/HO/MRD/MRD -PoD -1/P/CIR/2022/128 dated September 27, 2022.

40 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/96 dated September 27, 2016

3 · 4.2. Clubbing of Open Positions 41

3 · 4.3. Monitoring of Position Limits 42

3 · 5. Position limits for Agricultural Commodity Derivatives 43

3 · 5.1. Following norms shall be applicable on Agricultural Commodity Derivatives at commodity level:

41 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/96 dated September 27, 2016

42 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/96 dated September 27, 2016

43 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/96 dated September 27, 2016

44 · SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2017/84 dated July 25, 2017 .

45 · SEBI circular no. CDMRD/DMP/CIR/32/2016 dated January 29, 2016

46 · SEBI circular no. CDMRD/DMP/CIR/32/2016 dated January 29, 2016

47 · SEBI circular SEBI/HO/CDMRD/DMP/CIR/P/2017/84 dated July 25, 2017.

3 · 5.2. Framework for determination of numerical value of overall client level open position limits 48 :

48 · SEBI circular no. SEBI/HO/CDMRD/DMP/CIR/P/2017/84 dated July 25, 2017

3 · 6. Position limits for Non -A -Agricultural Commodity Derivatives 50

3 · 6.1. The following norms shall be applicable to NonAgricultural commodity derivatives at commodity level: -

49 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2018/96 dated June 11, 2018

50 · SEBI Circular No SEBI/HO/CDMRD/DMP/CIR/P/2016/96 dated September 27, 2016

3 · 7. Position Limit for Hedgers 51

3 · 7.1. In order to facilitate larger participation by genuine hedgers by providing them with necessary incentives with a view to deepen the commodity derivatives market, the stock exchanges shall stipulate a "Hedge Policy" for granting hedge limits to their members and clients. The stock exchanges shall widely publicize their respective hedge policy by holding awareness programmes for the target participants and making it publicly available on their website.

3 · 7.2. The stock exchanges shall adhere to the following broad guidelines while granting hedge limit exemptions to their members and clients:

51 · SEBI Circular NO. SEBI/HO/CDMRD/DMP/CIR/P/2016/71 dated August 19, 2016

4 · 1. Category III Alternative Investment Funds 52

4 · 1.1. Category-III Alternative Investment Funds ( " AIFs " ) are allowed to participate in the commodity derivatives market subject to the following conditions:

4 · 2Foreign Portfolio Investor5 r53

52 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2017/61 dated June 21, 2017

53 · SEBI Circular no SEBI/HO/MRD/MRD -RAC -1/P/CIR/2022/131 dated September 29, 2022

4 · 2.1 Foreign investors are allowed to participate in Indian Exchange Traded Commodity Derivatives ("ETCDs") through the Foreign Portfolio Investor ("FPI") route, subject to conditions prescribed by SEBI.

4 · 2.2 The participation of FPIs in Indian ETCDs would be subject to the following:

4 · 3Portfolio Management Services 54

4 · 3.1Portfolio Managers are permitted to participate in ETCDs on behalf of their clients' subject to the following:

54 · SEBI circular no SEBI/HO/IMD/DF1/CIR/P/2019/066 dated May 22, 2019.

4 · 3.2 It would be mandatory for Portfolio Managers to appoint SEBI registered Custodians before dealing in ETCDs .

4 · 4Mutual Funds55

4 · 4.1 Mutual Funds are permitted to participate in ETCDs subject to the following:

55 · SEBI circular no SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019.

56 · SEBI circular no. SEBI/HO/IMD/DF2/CIR/P/2020/96 dated June 05, 2020 .

4 · 4.2 Investment limits: Participation of mutual funds in ETCDs shall be subject to the following investment limits:

57 · SEBI circular no SEBI/HO/IMD/DF2/CIR/P/2021/10 dated January 15, 2021

58 · The cumulative gross exposure through equity, debt derivative positions (including commodity and fixed income derivatives), repo transactions and credit default swaps in corporate debt securities, Real Estate Investment Trusts ( " REITs " ), Infrastructure Investment Trusts ( " InvITs " ), other permitted securities/assets and such other securities/assets as may be permitted by SEBI from time to time should not exceed 100% of the net assets of the scheme

4 · 4.3 Disclosures: In case of mutual fund schemes investing in ETCDs, the AMC shall adhere to the following:

58 · SEBI Circular no. SEBI/HO/IMD/DF2/CIR/P/2021/24 dated March 04, 2021

59 · SEBI circular no SEBI/HO/IMD/DF2/CIR/P/2021/10 dated January 15, 2021

5 · 1.Product Design

5 · 1.1. Underlying: Goods as notified vide number S.O. 3068(E), dated the 27th September 2016 under clause (bc) of section 2 of the Securities Contracts (Regulation) Act, 1956.

5 · 1.2. Eligibility Criteria for Underlying: Only those goods shall be eligible as underlying for these options, on which the stock exchange either is already trading the futures contracts or is proposing to launch the futures contracts on or before the day of launching option in those goods. These option contracts shall have same quality specifications, delivery centres, Final Settlement Price methodology etc. as in the case of corresponding futures contracts.

5 · 1.3. Settlement Method: On exercise, option contract shall be settled through delivery of goods.

5 · 1.4. Exercise Style: All exercise style are permitted.

5 · 1.5. Minimum Strikes: Each option expiry shall have minimum three strikes available viz., one each for In the Money ( " ITM " ), Out of the Money ( " OTM " ) and At the Money ( " ATM " ).

5 · 1.6. Exercise Mechanism: On expiry, following mechanism shall be adopted by stock exchanges for exercise of the options contracts:

60 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2020/05 dated January 16, 2020

5 · 1.7. Trading hours: Trading hours shall be same as those of corresponding futures contract.

5 · 1.8. Expiry Day: Stock Exchanges shall have flexibility to decide upon expiry day of option contracts.

5 · 1.9. Minimum Tenor: Minimum tenor of such option contracts shall be same as those of corresponding futures contracts.

5 · 1.10. Position Limits:

5 · 2. Risk Management

5 · 2.1. Clearing Corporations ("CCs") shall adopt risk management framework compliant with the Principles for Financial Market Infrastructures issued by the Committee on Payments and Market Infrastructures ("CPMI " ) and the International Organization of Securities Commissions ("IOSCO"), including the following.

5 · 2.2. Margining model and quantum of initial margins: CCs shall adopt initial margin models and parameters that are risk-based and generate margin requirements sufficient to cover potential future exposure to participants/clients in the interval between the last margin collection and the close out of positions following a participant/client default. The model should

5 · 2.3. Volatility Scan Range 61 : The Volatility Scan Range ("VSR") in respect of various categories of commodities shall be subject to following minimum values:

61 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/08 dated January 11, 2021

5 · 2.4. Margining at client level: CCs shall impose initial margins at the level of portfolio of individual client comprising of his positions in futures and options contracts on each commodity.

5 · 2.5. Real time computation: Though the margining models may update various scenarios of parameter changes (underlying price, volatility etc.) at discrete time points each day (at least every two hours), the latest available scenarios shall be applied to client portfolios on a real time basis.

5 · 2.6. Mark to market: CCs shall mark to market the options positions by adding the current market value of options (positive for long options and negative for short options) to the margin requirement. Thus, mark to market gains and losses would not be settled in cash for options positions.

5 · 3. Other aspects

5 · 3.1. Stock Exchanges willing to start trading in options contracts with goods as underlying shall take prior approval of SEBI for launching such contracts.

5 · 3.2. Stock Exchanges shall make necessary disclosures such as open interest of top 10 largest participants/group of participants in "option in goods" (both long and short) and the details of their combined open interest in underlying constituents etc., as per Clause 1.15.4 of this Master Circular.

5 · 3.3. The stock exchanges shall augment their monitoring and surveillance capacity.

6 · 1. Product Design

6 · 1.1. Underlying: Commodity futures contract (of a specified month) traded on the corresponding stock exchange.

6 · 1.2. Eligibility criteria for selection of underlying Commodity Futures for Options: Options would be permitted for trading on a stock exchange only on those commodity futures as underlying, which are traded on its platform and satisfy the criteria specified below on the respective exchange:

6 · 1.3. Settlement Method: On exercise, option position shall devolve into underlying futures position as follows: -

6 · 1.4. Exercise Style: To begin with European Style options are permitted.

6 · 1.5. Minimum Strikes: Each option expiry shall have minimum three strikes available viz., one each for In the Money (ITM), Out of the Money (OTM) and At the Money (ATM).

62 · SEBI circular no SEBI/HO.CDMRD/DMP/CIR/P/2017/55 dated June 13, 2017

6 · 1.6. Exercise Mechanism: On expiry, following mechanism shall be adopted by Stock Exchanges for exercise of the options contracts: 63

6 · 1.7. Trading Hours: Trading hours shall be same as those of corresponding futures contract.

6 · 1.8. Expiry Day: Expiry day of options contracts shall be decided by the Stock Exchange based upon period of high liquidity of underlying futures contract and shall be part of option contract specifications .

6 · 1.9. Position Limits

63 · SEBI Circular No. SEBI/HO/CDMRD/DNP/CIR/P/2022/01 dated January 03, 2022.

6 · 2. Risk Management

6 · 2.1. Stock Exchanges shall adopt risk management framework compliant with the CPMI -IOSCO Principles for Financial Market Infrastructures , including the following.

6 · 2.2. Margining model and quantum of initial margins: Stock Exchanges shall adopt initial margin models and parameters that are risk -based and generate margin requirements sufficient to cover potential future exposure to participants/clients in the interval between the last margin collection and the close out of positions following a participant/client default. The model should:

6 · 2.3. Volatility Scan Range 64 : The VSR in respect of various categories of commodities shall be subject to following minimum values:

64 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/08 dated January 11, 2021

6 · 2.4. Margining at client level: Stock Exchanges shall impose initial margins at the level of portfolio of individual client comprising of his positions in futures and options contracts on each commodity.

6 · 2.5. Real time computation: Though the margining models may update various scenarios of parameter changes (underlying price, volatility etc.) at discrete time points each day (at least every two hours), the latest available scenarios shall be applied to client portfolios on a real time basis.

6 · 2.6. Mark to market: Stock Exchanges shall mark to market the options positions by deducting/adding the current market value of options (positive for long options and negative for short options) times the number of long/short options in the portfolio from/to the margin requirement. Thus, mark to market gains and losses would not be settled in cash for options positions.

6 · 2.7. Risks pertaining to options that devolve into futures on expiry:

6 · 3. Other aspects

6 · 3.1. The stock exchanges willing to start trading in such options contracts shall take prior approval of SEBI for launching such contracts.

7 · 1. Design of Commodity Indices

7 · 1.1. Types of Indices: Composite (i.e., comprising of commodities from more than one sector) as well as sectoral indices, meeting the eligibility criteria specified herein are permitted. For being eligible to launch derivatives upon, stock exchanges shall ensure that indices are compliant with IOSCO Principles for Financial Benchmarks and make necessary disclosures in this regard on their websites. Further, stock exchanges shall also ensure that an index is not susceptible to manipulation and shall make mandatory disclosure with respect to the Index design parameters on their website.

7 · 1.2. Name: The name of index should include the name of the stock exchange on which the constituents of index are traded.

7 · 1.3. Eligibility criteria: Constituents of the commodity index shall meet the criteria given below –

65 · SEBI circular no SEBI/HO/CDMRD/DNPMP/CIR/P/2019/71 dated June 18, 2019

7 · 1.4. Re -balancing

7 · 1.5. Weights of constituents

7 · 1.6. Computation and roll over

7 · 1.7. Real time dissemination: The index value shall be updated on real time continuous basis and shall be displayed on the Exchange website.

7 · 1.8. Dissemination of methodology: Stock Exchange shall ensure a transparent methodology of index construction, calculation, dates and details of roll over, dates and other details of periodic rebalancing, report on compliance with IOSCO principles etc., and disseminate the same on its website.

7 · 2. Product Design for Futures on Commodity Indices

7 · 2.1. Trading Hours: The trading hours shall be in line with the trading hours for constituent futures of underlying index. In case trading hours vary for constituents, trading hours for index derivatives shall be kept such that it is available for trading whenever any of the constituent futures contract is available for trading. However, on the day of its expiry, Index futures contract shall expire at 5:00 pm.

7 · 2.2. Size of the Contract: At least INR 5 lakh at the time of introduction in the market.

7 · 2.3. Tenor of the Contract: To begin with, maximum tenor of contracts shall be 12 months.

7 · 2.4. Available Contracts: Stock Exchanges shall decide the number of contracts, duration of contracts and launch calendar based on market requirements.

7 · 2.5. Position Limits

7 · 2.6. Daily Price Limit: Stock Exchanges shall decide appropriate daily price limits for commodity index futures based on historical price movement of the indices.

7 · 2.7. Settlement Mechanism: Final Settlement for futures on commodity index shall be done in cash.

7 · 2.8. Final Settlement Price: The Final Settlement Price shall be the underlying index price arrived at based on Volume Weightage Average Price of the constituents of the underlying index between 4:00 pm and 5:00 pm on the expiry day of the Index futures contract. {In absence of trading in any constituent during last one hour, stock exchange shall determine appropriate methodology (in line with the methodology for determining daily closing price) to arrive at appropriate price of the constituent to be used for determining index price}.

7 · 2.9. Expiry date: The stock exchanges shall have the flexibility to set the expiry date for contracts. However, the expiry date may not coincide with the roll -over period of the constituents of the underlying index.

7 · 2.10. Application: Before launching any futures contract on an index, a stock exchange shall submit its proposal with contract specifications and risk management framework to SEBI, for approval.

7 · 3. Risk Management

7 · 3.1. Stock Exchanges shall adopt risk management framework compliant with the CPMI -IOSCO Principles for Financial Market Infrastructures , including the following.

7 · 3.2. Margining model and quantum of initial margins: Stock Exchanges shall adopt initial margin models and parameters that are risk -based and generate margin requirements sufficient to cover potential future exposure to participants/clients in the interval between the last margin collection and the close out of positions following a participant/client default. The model should:

7 · 3.3. Margining at client level: Stock Exchanges shall impose initial margins at the level of portfolio of individual client.

7 · 3.4. Real time computation: Though the margining models may update various scenarios of parameter changes (underlying price, volatility etc.) at discrete time points each day (at least every two hours), the latest available scenarios shall be applied to client portfolios on a real time basis.

7 · 4. Cross Margin in Commodity Index Futures and its underlying constituent futures or its variants66

7 · 4.1. SEBI has prescribed norms, inter-alia, for providing margin benefit on spread positions in commodity futures contracts. In order to improve the efficiency of the use of the margin capital by market participants, cross margin benefit between Commodity Index futures and futures of its underlying constituents or its variants was introduced as it would reduce the cost of trading and may lead to enhanced liquidity in both the Commodity index futures and its underlying constituent futures or its variants.

7 · 4.2. Therefore, based on the consultation with the stakeholders, the following provisions shall be applicable in this regard;

66 · SEBI Circular no. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2021/586 dated June 29, 2021

7 · 5. Other aspects

7 · 5.1. The stock exchanges willing to start trading in futures on commodity indices shall take prior approval of SEBI for launching such contracts. Stock Exchanges shall have to submit at-least past 3 years data of the index constructed along with data on monthly volatility, roll over yield for the month and monthly return while seeking approval from SEBI. On approval, stock exchanges shall also publish the above data on their website before launch of the products.

7 · 5.2. Stock Exchanges shall make necessary disclosures such as open interest of top 10 largest participants/group of participants in index futures (both long and short) and the details of their combined open interest in underlying constituents etc., as per section 1.15.

7 · 5.3. The Stock Exchanges shall augment their monitoring and surveillance capacity.

8 · 1. Product Design

8 · 1.1. Underlying: The underlying shall be commodity indices, which shall conform to the guidelines as prescribed in Chapter 7 of this Master Circular.

8 · 1.2. Eligibility Criteria for Underlying: Option contracts may be introduced on those indices on which futures contracts are available.

8 · 1.3. Settlement Mechanism: On exercise, options contract shall be settled in cash.

8 · 1.4. Exercise Style: European style options.

8 · 1.5. Minimum Strikes: Each option expiry shall have minimum three strikes available viz., one each for In the Money ( " ITM " ), Out of the Money ( " OTM " ) and At the Money ( " ATM " ).

8 · 1.6. Size of the Contract: At least INR 5 lakh at the time of introduction in the market.

8 · 1.7. Exercise Mechanism: On expiry, following mechanism shall be adopted by stock exchanges for exercise of the options contracts:

67 · SEBI Circular No. SEBI/HO/CDMRD/DNP/CIR/P/2022/34 dated March 24, 2022

8 · 1.8. Trading Hours: The trading hours shall be in line with the trading hours for constituent futures of underlying index. In case trading hours vary for constituents, trading hours for index derivatives shall be kept such that it is available for trading whenever any of the constituent futures contract is available for trading. However, on the day of its expiry, Index options contract shall expire at 5:00 pm.

8 · 1.9. Expiry Date: The stock exchanges shall have the flexibility to set the expiry date for contracts. However, the expiry date shall not coincide with the roll -over period of the constituents of the underlying index.

8 · 1.10. Tenor of the Contract: To begin with, maximum tenor of contracts shall be 12 months.

8 · 1.11. Final Settlement Price: The Final Settlement Price shall be the underlying index price arrived at based on Volume Weightage Average Price of the constituents of the underlying index between 4:00 pm and 5:00 pm on the expiry day of the Index options contract.{In absence of trading in any constituent during last one hour, stock exchange shall determine appropriate methodology (in line with the methodology for determining daily closing price) to arrive at appropriate price of the constituent to be used for determining index price}.

8 · 1.12. Position Limits:

2000 · lots

20000 · lots

8 · 2.Risk Management

8 · 2.1. Margining model and quantum of initial margins: CCs shall adopt initial margin models and parameters that are risk-based and generate margin requirements sufficient to cover potential future exposure to participants/clients in the interval between the last margin collection and the close out of positions following a participant/client default. The model should:

8 · 2.2. Margining at client level: CCs shall impose initial margins at the level of portfolio of individual client.

8 · 2.3. Real time computation: Though the margining models may update various scenarios of parameter changes (underlying price, volatility etc.) at discrete time points each day (at least every two hours), the latest available scenarios shall be applied to client portfolios on a real time basis.

8 · 2.4. Mark to Market: CCs shall mark to market the options positions by adding the current market value of options (positive for long options and negative for short options) to the margin requirement. Thus, mark

8 · 3.Other aspects

8 · 3.1. Stock Exchanges willing to introduce trading in options on commodity indices shall take prior approval of SEBI for the same.

8 · 3.2. Stock Exchanges shall submit at-least past three-years data of the index constructed along with data on monthly volatility, roll over yield for the month and monthly return while seeking approval from SEBI. On approval, the Stock Exchange(s) shall also publish the above data on their website before launch of the contract.

8 · 3.3. Stock Exchanges shall make necessary disclosures, such as, open interest of top 10 largest participants/group of participants in "option in indices" (both long and short) and the details of their combined open interest in underlying constituents, etc., in line with Clause 1.15.4 of this Master Circular.

8 · 3.4. Stock exchanges shall put in place adequate monitoring and surveillance capacity for the options on indices contracts.

9 · 1. Risk Management Framework 68

9 · 1.1. Overview: The core of the risk management system of stock exchanges shall comprise of the following:

68 · SEBI Circular No. CIR/CDMRD/DRMP/01/2015 dated October 01, 2015

69 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated September 01, 2016.

70 · SEBI Circular No. SEBI/HO/CDMRD/DNPMP/CIR/P/2019/83 dated July 26, 2019.

9 · 1.2. Liquid Assets: The types of liquid assets acceptable by Stock Exchanges from their members and the applicable haircuts and concentration limits are listed below:

71 · SEBI Circular SEBI/HO/CDMRD/DRMP/CIR/P/2018/52 dated March 21, 2018

72 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/112 dated 14 October 2016.

73 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2019/100 dated September 13, 2019.

9 · 1.3. Commodity Futures

74 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2019/100 dated September 13, 2019.

75 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/52 dated March 21, 2018

76 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated September 01, 2016

77 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 dated January 27, 2020.

78 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/51 dated 20 March 2018

79 · SEBI Circular No. CIR/ISD -2/CDD -1/99/2016 dated September 27, 2016

80 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/130 dated December 02, 2016.

81 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/51 dated March 20, 2018

82 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/ dated 9 August, 2021.

83 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated 01 September 2016

9 · 1.4. Concentration Margins 85 : Stock Exchanges shall impose adequate concentration margins (only on concentrated positions) to cover the risk of longer period required for liquidation of concentrated positions in any commodity. The threshold value for imposing concentration margin may be determined taking into account factors including open interest, concentration and estimated time to liquidation based on prevailing liquidity and possible reduction in liquidity in times of market stress etc. The quantum of concentration margins imposed may vary based on the level of concentration.

9 · 1.5. Additional Ad -hoc Margins: Stock Exchanges have the right to impose additional risk containment measures over and above the risk containment system mandated by SEBI. However, the Stock Exchanges should keep the following three factors in mind while taking such action:

84 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 dated 27 January, 2020

85 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated 01 September 2016

9 · 1.6. Margin Provisions for Intra-day crystallized losses 86 : In order to mitigate the risk arising out of accumulation of crystallized obligations incurred on account of intra -day squaring off of positions, the stock exchanges shall adopt the following:

9 · 1.7. Margin Collection and Enforcement: All applicable margins shall be deducted by Stock Exchanges from the Liquid Assets of the clearing members on an online, real time basis. Margins applicable on client positions have to be compulsorily collected from the clients and reported to the Stock Exchange by the members.

86 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/52 dated March 21, 2018

9 · 1.8. Minimum Liquid net-worth 87 : Members of Clearing Corporations in commodity derivatives segment shall maintain a minimum Liquid Net -worth of at least INR 50 Lakhs at all points of time.

9 · 1.9. Base Minimum Capital ( " BMC " ) 88

9 · 1.10. Risk Reduction Mode: Stock Exchanges shall ensure that the trading members/clearing members are mandatorily put in riskreduction mode when 90% of the member's Liquid Assets available for adjustment against margins/deposits gets utilized for

87 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/52 dated March 21, 2018

88 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/86 dated September 16, 2016

89 · SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2018/52 dated March 21, 2018

9 · 1.11. Measures in case of repeated shortfall in margin/pay-in 90 : In case of repeated margin/pay-in shortfalls beyond a threshold amount by any member in a month, following risk mitigation measures shall be initiated:

90 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/77 dated 01 September 2016

9 · 2. Alternative Risk Management Framework Applicable in case of Near Zero and Negative Prices 91

9 · 2.1. In order to enable risk management framework to handle the scenario of 'near zero' and negative prices, the following provisions shall be complied: -

91 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2020/176 dated September 21, 2020

92 · SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2021/20 dated February 23, 2021

9 · 2.2. The Alternate Risk Management Framework ( " ARMF " ) in the event of Near Zero and Negative Prices is as follows:

9 · 3. Regaining matched book

9 · 3.1. In the event of a member/client failing to honour pay-in/margin obligations, stock exchanges may employ the below given alternative tools to liquidate the positions and regain a matched book based on the conditions of market liquidity, volatility, size of position to be liquidated etc. Any tool lower in the list prescribed hereunder may be resorted to only in extremely rare occasions when the exchange reasonably expects that it may not be able to restore a matched book

9 · 3.2. To enable timely and error free execution, CCs shall have an automated system to implement all such tools. CCs shall put in place such system, and also conduct testing of the same .

9 · 4. Framework to Enable Verification of Upfront Collection of Margins

9 · 4.1. The provisions related to framework to enable verification of upfront collection of margins shall be same as specified for equity cash segment in SEBI circular no. SEBI/HO/MRD2/DCAP/CIR/P/2020/127 dated July 20, 2020 , SEBI/HO/MRD2/DCAP/P/CIR/2022/60 dated May 10, 2022 and SEBI/HO/MRD/MRD -PoD -2/P/CIR/2023/016 dated February 01, 2023 and subsequent amendment thereto or supersession through any circular or master circular issued from time to time.

9 · 4.2. Para 2 of clause (i) of Annexure of SEBI circular no. SEBI/HO/MRD2/DCAP/CIR/P/2020/127 dated July 20, 2020 was modified as under:94

93 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2020/32 dated March 03, 2020.

94 · SEBI Circular No. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2021/689 dated December 16, 2021

9 · 5. Mechanism for regular monitoring of and penalty for shortcollection/ non-collection of margins from clients 95

9 · 5.1. The penalty structure and framework for short-collection/noncollection of margins by members from their clients shall be as under:

95 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/80 dated September 7, 2016

96 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/93 dated September 26, 2016

97 · SEBI Circular No. CIR/HO/MIRSD/DOP/CIR/P/2019/88 dated August 01, 2019.

98 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2019/73 dated June 20, 2019

99 · SEBI Circular No. CIR/HO/MIRSD/DOP/CIR/P/2019/88 dated August 01, 2019.

100 · SEBI circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2019/149 dated November 29, 2019

9 · 6. Settlement Guarantee Fund, Default Waterfall and Stress Testing

9 · 6.1. Clearing Corporations and Stock Exchanges in Commodity Derivatives segment shall comply with provisions given in Annexure O regarding Core Settlement Guarantee Fund (Core SGF) with respect to Core SGF, Stress Testing and Default Waterfall post transfer of Clearing and Settlement Function from Stock Exchanges to Clearing Corporations. 101

9 · 6.2. Risk managementdisclosure by Stock Exchange: 102 The disablement of terminals of the members along with duration of disablement due to shortage of funds, margin money etc. may be disclosed on the Stock Exchange website for every quarter at the end of i.e.30th June, 30th September, 31st December and 31st March.

9 · 7. Interoperability among Clearing Corporations

9 · 7.1. The interoperability framework is not available for commodity derivatives products available for trading on the stock exchange. 103

101 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2018/111 dated July 11, 2018.

102 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/93 dated September 26, 2016

103 · SEBI Circular No. CIR/MRD/DRMNP/CIR/P/2018/145 dated November 27, 2018

10 · 1. Permission for Trading in Futures Contracts 104

10 · 1.1. Check -list of information/details to be submitted along with proposal for launch of new contract or/and for renewal of existing/earlier contracts : All proposals of stock exchange for launch of new contract and/or for renewal of existing/earlier contracts shall be accompanied by complete information covering all the points appended at Annexure P regarding Checklist of information/details for launch of new contract or/and for renewal of existing/earlier contracts . The parameters / items listed in the check-list for compliance are illustrative and not exhaustive. Any additional relevant parameter/information as deemed necessary may also be furnished while sending proposal for contracts.

10 · 1.2. Approval for futures contracts on continuous basis: The Stock Exchange wise list of contracts approved for continuous trading is placed at Annexure Q regarding List of contracts approved for continuous trading . Approval for continuous trading in futures contracts is contingent upon volume and open interest at the Stock Exchange. Continuous approval for futures trading in the said contracts is subject to the following terms and conditions:

104 · SEBI Circular No. CIR/CDMRD/DRMP/CIR/2016/88 dated September 20, 2016

10 · 1.3 Multiple contracts in same commodity 105

10 · 2. Modifications in the Contract Specifications of Commodity Derivatives Contracts 106

10 · 2.1. The modifications in contract specification parameters are categorized in following three categories:

10 · 2.2. The list of various contract specification parameters as per the above stated categories along with the timelines for advance intimation of modification to SEBI and market participant is given at Annexure R on Categorization of contract specification parameters in commodity derivatives contracts .

10 · 2.3. The permission to modify contract specification parameters of commodity derivatives contracts is subject to the condition that before introduction of any modification in contract specifications the stock exchanges shall inform SEBI and market participants along with reasons for the modifications as per the timeline mentioned in Annexure at Categorization of contract specification parameters in commodity derivatives contracts . However, this shall not apply to certain modifications which are required to be effected immediately considering the exigencies of the situation as per surveillance measure.

105 · SEBI Circular No SEBI/HO/MRD/MRD -POD -1/P/CIR/2023/12 dated January 11, 2023

106 · SEBI Circular no. SEBI/HO/CDMRD/DOP/CIR/P/2019/135 dated November 14, 2019.

11 · 1. Staggered Delivery 107

11 · 1.1. Staggered delivery period is the period, beginning few working days prior to expiry of any contract and ending with expiry, during which sellers/buyers having open position may submit an intention to give/take delivery.

11 · 1.2. All compulsory delivery commodity futures contracts (agriculture commodities as well as non -agriculture commodities) shall have a staggered delivery period.

11 · 1.3. The minimum duration of staggered delivery period shall be at least five working days.

11 · 1.4. Stock Exchanges shall have the flexibility to set higher duration of staggered delivery period for any commodity futures contract, as deemed fit, taking into account various factors such as historical open interest, volume near expiry etc. In this regard, for the benefit of the market participants, all the exchanges shall jointly prepare and publish a detailed framework outlining various circumstances and factors which would generally require longer duration of staggered delivery period in any commodity.

11 · 1.5. In the interest of trade and public, SEBI or stock exchange may exercise its due discretion in modifying the aforesaid staggered delivery period at any time.

11 · 1.6. Framework

107 · SEBI Circular No. SEBI/HO/CDMRD/DNPMP/CIR/P/2019/83 dated July 26, 2019.

11 · 2. Early Delivery System 108

11 · 2.1. In all futures contracts for which early delivery system is mandated, the framework shall be as given below:

108 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September 21, 2016

11 · 3. Early Pay-in Facility 109

11 · 3.1. Stock Exchanges shall provide early pay-in facility to market participants permitting market participants to deposit certified goods to the Stock Exchange accredited warehouse against relevant futures contracts sold. For such short positions against which early pay -in has been made, based on risk perception, stock exchanges may exempt imposition of all types of margins. However, Stock Exchanges shall continue to collect mark to market margins from such market participants against such positions.

11 · 3.2. In case of compulsory delivery and seller's option contracts, delivery to the extent of open position at the expiry of the contract shall be mandatory after claiming early pay-in facility on the position. The stock exchanges should provide for extremely strict penalties including disciplinary actions against such members who fail to do so.

11 · 4. Penalty on Delivery Default 110

11 · 4.1. Penalty on seller in case of delivery default (default in delivery against open position at expiry in case of compulsory delivery contracts, default in delivery after giving intention for delivery) shall be as follows:

109 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September 21, 2016

110 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September 21, 2016

111 · SEBI circular SEBI/HO/CDMRD/DRMP/CIR/P/2021/35 dated March 23, 2021

11 · 4.2. 112[Clearing Corporation/ Stock Exchanges] shall have the flexibility to increase/ decrease penalty for specific commodities depending on situation, in consultation with SEBI .

11 · 4.3. Norms for apportionment of penalty –

113 · (1% of Settlement Price in case of non-agri goods or 2% of Settlement price in case of agri goods) plus replacement cost shall go to buyer who was entitled to receive delivery

11 · 4.4. 114[Clearing Corporation] may have appropriate deterrent mechanism (including penal/disciplinary action) in place against intentional/wilful delivery default.

11 · 4.5. 115In the case of a default by a buyer in both agricultural and nonagricultural commodities, following standard procedure shall be followed by the CCs:

11 · 5. Penalty for Repeated Delivery Default 116

11 · 5.1. A need was felt to put in place a suitable deterrent mechanism to address instances of repeated delivery defaults to further strengthen the delivery mechanism and ensure market integrity.

112 · SEBI circular SEBI/HO/CDMRD/DRMP/CIR/P/2021/35 dated March 23, 2021

113 · SEBI circular SEBI/HO/CDMRD/DRMP/CIR/P/2021/35 dated March 23, 2021

114 · SEBI circular SEBI/HO/CDMRD/DRMP/CIR/P/2021/35 dated March 23, 2021

115 · SEBI circular SEBI/HO/CDMRD/DRMP/CIR/P/2021/35 dated March 23, 2021 .

116 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/619 dated August 17, 2021

11 · 5.2. In view of the above, in consultation with CCs, the following has been decided:

11 · 6. Fixation of Final Settlement Price (FSP) 117

11 · 6.1. For contracts where Final Settlement Price ( " FSP " ) is determined by polling, unless specifically approved otherwise, the FSP shall be arrived at by taking the simple average of the last polled spot prices of the last three trading days viz., E0 (expiry day), E-1 and E-2. In the event the spot price for any one or both of E1 and E-2 is not available; the simple average of the last polled spot price of E0, E-1, E-2 and E -3, whichever available, shall be taken as FSP. Thus, the FSP under various scenarios of non -availability of polled spot prices shall be as under

117 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September 21, 2016

11 · 6.2. In case of non -availability of polled spot price on expiry day (E0) due to sudden closure of physical market under any emergency situations noticed at the basis centre, the stock exchanges shall decide further course of action for determining FSP in consultation with SEBI.

11 · 7. Change in Expiry Date 118

11 · 7.1. Stock Exchange may advance expiry date of running contract in case physical market is closed in the notified basis centre on the expiry day of the contract, due to festivals, strikes, erratic weather conditions, etc.

11 · 7.2. Decision about advancing expiry of running contract shall be intimated to the trade participants at least 10 days before the revised expiry date. The delivery period may be advanced accordingly for contract having staggered delivery. The FSP of such contract shall be fixed as per the above mentioned procedure.

11 · 8. Identification and Selection of Location as a Delivery Centre(s) 119

11 · 8.1. Considering the inter-play of various factors, a particular location can be identified and selected as a delivery centre by a stock exchange based on all or combination of the following guidelines.

118 · SEBI Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2016/90 dated September 21, 2016

119 · SEBI Circular No. SEBI/HO/CDMRD/DNPMP/CIR/P/2020/89 dated May 26, 2020

11 · 8.2. Review of delivery centre:

11 · 8.3. SEBI has issued guidelines about the PAC (Chapter 2) in which the terms of reference, inter-alia, includes choice of basis and additional

11 · 9. Criteria for Settlement Mode of Commodity Derivative Contracts 120

11 · 9.1. The first preference of settlement type for commodity derivatives contracts shall always be by the way of physical delivery .

11 · 9.2. Any exemption from the above i.e. cash settlement of commodity derivatives contract, may be considered only in following scenarios with a proper justification –

11 · 9.3. Subject to the above conditions, both cash settled and physically settled derivative contracts on the same commodity may also be considered for trading, in case basis of price discovery of the proposed contracts is different.

11 · 10. Timelines for Marking Delivery Intention 121

120 · SEBI Circular no SEBI/HO/CDMRD/DMP/CIR/P/2017/116 dated October 16, 2017

121 · SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2016/93 dated September 26, 2016

11 · 10.1. Stock Exchanges may decide the timelines for submission of delivery instruction by members based on their assessment of the time required for marking as well as for modifying any delivery intentions wrongly marked.

11 · 11. Location Premium / Discount 122

11 · 11.1. Stock Exchanges shall determine and disclose for contracts the location premium / discount prior to launch of the contract in various commodities.

122 · SEBI Circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2016/93 dated September 26, 2016

12 · 1. General

12 · 1.1. The Clearing Corporations to have in place comprehensive framework of norms for adherence by the Warehouse Service Providers ( " WSP " ), 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.

12 · 1.2. The norms prescribed herein are the minimum requirements/standards which the Clearing Corporation will set out for compliance by its accredited WSPs and assayers and are to be complied with in conjunction with the applicable norms laid down by WDRA or any other government authority overseeing the warehousing or storage infrastructure and its ancillary services for the respective goods.

12 · 1.3. The Clearing Corporations are at liberty to prescribe additional norms/guidelines for compliance by their accredited WSPs, warehouses and assayers, if they deem so fit, for ensuring good delivery of commodities by them. However, it must be ensured by the Clearing Corporations that such additional norms specified are not in contravention with the provisions issued herein.

12 · 1.4. The Clearing Corporations shall put in place necessary arrangements for ensuring compliance with the provisions of Regulation 43A of SECC Regulations. Further, the Clearing Corporations shall have necessary arrangements to ensure that in the event of bankruptcy or insolvency of the WSP or other such contingency, there must be no restrictions placed upon owners/depositors of the commodity desiring to take possession of their individually identified commodity and remove it from the accredited Warehouse(s).

123 · SEBI Circular no. SEBI/HO/CDMRD/DMP/P/CIR/2021/551 dated April 16, 2021.

12 · 2. Accreditation of Warehouse Service Provider (WSP)

12 · 2.1. For accreditation of WSPs, the Clearing Corporation shall publish open advertisements in leading newspapers and/or put up the same on their website and follow transparent selection process thereafter. The selection process to be followed for such accreditation shall be displayed on the website of the Clearing Corporation before the process begins. The Clearing Corporation shall ensure that the applications of the WSPs are processed within a stipulated time frame.

12 · 2.2. The Clearing Corporation shall ensure that the WSP had obtained the required registrations of the proposed storage facility from the WDRA for commodities notified by the WDRA and for other commodities under applicable law/s and the same shall be intimated by it to the Clearing Corporation prior to providing the storage services to the Clearing Corporation.

12 · 2.3. The accreditation of the WSPs shall be done with the approval of the relevant committee of the board of directors of the Clearing Corporation in terms of the SECC Regulations.

12 · 2.4. A WSP can be accredited with more than one Clearing Corporation. In such case, the Clearing Corporation shall not mandate that its WSP cannot provide services to other Clearing Corporations.

12 · 2.5. A storage facility of a WSP may be utilized by more than one Clearing Corporation with proper segregation, demarcation and putting in place appropriate risk management procedures. However, the same storage facility shall not be utilized by more than one Clearing Corporation for the same commodity .

12 · 2.6. The accreditation of a WSP shall remain valid until:

12 · 3. Eligibility and Experience of WSP/Promoters/Promoter Group of WSP

12 · 3.1. A WSP shall be a corporate body which is in public warehousing business.

12 · 3.2. The Promoters/ Promoter Groups of the WSP should be responsible persons/entities of repute with a good business reputation and credibility.

12 · 3.3. The Promoters/Promoter Groups of the WSP should be in the business of public warehousing for at least 3 years as on the date of their application and have knowledge of, and experience in, generally accepted warehousing and handling practices for commodities for which they propose to provide their services.

12 · 3.4. However, the Clearing Corporation in its discretion, may relax the norm of 3 years stated in para 12.3.3 above, provided that the WSP or its promoter/promoter group:

12 · 3.5. WSP / Promoters/ Promoter Group of WSP shall have no record of serious violation of law of land including that of laws governing warehousing / securities markets; or being expelled by any Clearing Corporation/stock exchange in last three years. The Clearing Corporation can take an appropriate undertaking from the WSP in this regard.

12 · 4. Financial Soundness of the WSP

12 · 4.1. Share Capital: The Clearing Corporation shall ensure that an accredited WSP shall have subscribed and paid-up share capital of at least ₹10 crores.

12 · 4.2. Net worth

12 · 4.3. Security Deposit ( " SD " )

12 · 4.4. Financial Security Deposits ( " FSD " )

12 · 4.5. Exposure norms for FSD/SD

12 · 4.6. Coordination between Clearing Corporation and WDRA in respect of SD / FSD maintained by the WSPs 124

124 · SEBI Circular no. SEBI/HO/CDMRD/DMP/P/CIR/2021/551 dated April 16, 2021.

12 · 5. Fit and Proper Criteria

12 · 5.1. The Clearing Corporation shall ensure that:

12 · 6. Corporate Governance norms for WSP

12 · 6.1. Management and Employees:

12 · 6.2. Compliance officer

12 · 7. Know Your Depositor

12 · 7.1. The Clearing Corporation shall ensure that the WSP complies with Know Your Depositor ( " KYD " ) Policy as prescribed by the Clearing Corporation from time to time.

12 · 7.2. The Clearing Corporation shall ensure that they and the WSP shall, at any point of time be able to identify the depositor of the goods deposited in registered warehouses, and the actual beneficiary (in case the depositor and the beneficiary are different) of the deposited/stored commodities.

12 · 8. PAN requirement

12 · 8.1. The Clearing Corporation shall ensure that the WSPs are under obligation to provide to it the details including PAN numbers of its Promoters, Promoter group entities, its holding / subsidiaries / associates and other related entities, persons 'acting in concert', Key Management Personnel, at the time of accreditation and update the same on periodical basis as mandated by the Clearing Corporation and whenever any change is noted by WSP, in this regard.

12 · 9. Facilities & Infrastructure Requirement for WSP

12 · 9.1. General requirements applicable to all goods

12 · 9.2. Requirements applicable for Agricultural & agri-processed commodities

12 · 9.3. Requirements applicable for Base Metals/Industrial Metals

12 · 10. Standard Operating Procedure (SOP) and Standards

12 · 10.1. ISO or other Relevant Standards

12 · 10.2. SOPs

12 · 11. Sampling Procedure

12 · 11.1. The Clearing Corporations shall ensure that, wherever assaying is carried out by WSPs, adequate samples of goods are collected/retained from the goods deposited and are sealed in the presence of the depositor or his authorized representative.

12 · 11.2. In order to resolve potential disputes arising with respect to the quality of goods, if any, at least four samples shall be taken of which one sample shall be used for analysis, one shall be kept with the WSP for comparison purpose, one shall be given to the depositors while one shall be kept for record/lab reference purpose.

12 · 12. Accreditation of Assayers

12 · 12.1. The Clearing Corporation shall follow a transparent process for accreditation of assayers by issue of open advertisement in leading newspapers and/or by putting up the same on the website of the Clearing Corporation. The process to be followed for such accreditation shall be displayed on the website of the Clearing Corporation before the beginning of the selection process. The accreditation shall be done with the approval of the relevant Committee of the board of directors of the Clearing Corporation in terms of the SECC Regulations .

12 · 12.2. The Clearing Corporation shall conduct independent preempanelment due diligence of Assayers by visiting the laboratories

12 · 12.3. The Clearing Corporation shall ensure that the empanelled assayers work independently, and their operations are governed by the SOPs prepared by the Clearing Corporation. The assayers shall be preferably certified by one or more national/international agencies like NABL, BIS etc., and shall have the facilities as laid down by the Clearing Corporation from time to time.

12 · 13. Warehouses at delivery centres

12 · 13.1. The Clearing Corporation shall have at least one storage facility at each of the delivery centres (as specified in the contract specification) at the time of launch of contract itself and address of such storage facility shall be disclosed along with the contract specifications by the Clearing Corporation on their website / by issuance of relevant Circular to all market participants.

12 · 13.2. The Clearing Corporation may accredit warehouses of a WSP within a radius of 100 km of the delivery centres depending on the feasibility and market requirements in respect of all commodities.

12 · 14. Insurance

12 · 14.1. The Clearing Corporation shall ensure that its WSPs, whether presently registered with the WDRA or not, comply with the insurance guidelines/ norms issued by the WDRA.

12 · 15. Embracing new technology

12 · 15.1. The Clearing Corporations shall strive to adopt the latest technology for routine and surprise inspections/audits, monitoring and surveillance of the warehouses etc.

12 · 15.2. The Clearing Corporation shall ensure that to the extent possible the WSP to be accredited by them has adopted or shall adopt the latest technology with respect to the operations of the warehousing business. The Clearing Corporation may identify the areas where use of latest technology can be mandated by it and provide a timeframe to its WSPs for adoption of the same.

12 · 16. Monitoring/Inspection/Audit

12 · 16.1. Periodic inspection/audit by WSPs

12 · 16.2. Periodic inspection/audit of warehouses by the Clearing Corporation

12 · 16.3. Monitoring of goods stored at accredited storage facilities by the Clearing Corporations

12 · 16.4. Physical inspections of goods by beneficiary owner of goods

12 · 16.5. Physical reconciliation of goods

12 · 16.6. Review of WSPs/Warehouses

12 · 17. Code of Conduct

12 · 17.1. The Clearing Corporation shall frame code of conduct for the WSPs, storage facility and assayers which shall be disclosed on the website of the Clearing Corporation.

12 · 18. Grievance Cell

12 · 18.1. The Clearing Corporation shall ensure that it has a Grievance Cell to handle the investor complaints.

12 · 18.2. The Clearing Corporation shall take proactive steps to resolve client/customer related issues and maintain a record of complaints received and resolved.

12 · 18.3. The Clearing Corporation shall require the WSP to report the details of complaints received, resolved by it, pending and action taken on the complaints, once in very fortnight.

12 · 19. Monthly Information System (MIS)

12 · 19.1. It is desirable that there should be electronic record of information at the WSP and a MIS system with an arrangement for flow of real time information from the storage facility location to the central MIS and onwards to the Clearing Corporations electronically. The MIS should have the capability to capture and disseminate information regarding goods being held either storage facility -wise or location-wise, or the availability of space in the storage facilities.

12 · 19.2. The Clearing Corporation shall display on its website, the list of accredited warehouses for the deposit of goods for delivery on the exchange platform along with the policy for deposit of such goods. The market participants willing to deposit goods in accredited warehouses shall submit a request to the WSP in accordance with the policy put in place by the Clearing Corporation for deposit of goods. The WSP shall intimate the depositing participant about the logistic details such as the time, place and storage facility where the goods can be deposited by them. The WSP shall accept the goods for deposits for all such confirmed deposit requests in accordance with the policy put in place by the Clearing Corporation for deposit of goods.

12 · 20. Surrender/Cancellation of accreditation

12 · 20.1. The WSP may apply for surrender of its accreditation by submitting the Application for Surrender to the concerned Clearing Corporation for evaluation and approval.

12 · 20.2. The Clearing Corporation may cancel the accreditations of 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 Clearing Corporation shall put in place a cancellation policy for WSP in public domain. However, the Clearing Corporation shall offer the WSP concerned an opportunity of being heard and take a decision on cancellation after considering the explanation of the WSP.

12 · 20.3.A WSP that surrenders its accreditation, or its accreditation is cancelled, shall attend to the following matters urgently:

12 · 20.4. Financial Security Deposit ("FSD") shall be returned in accordance with the rules framed by the Clearing Corporations, keeping aside 10% of such deposits with the Clearing Corporations, which shall not be released until six months after cancellation or surrender of accreditation of the WSP or until satisfaction of all claims against the deposits made in its warehouses, whichever is later.

12 · 20.5. A WSP which surrenders its accreditation with the Clearing Corporations shall not be eligible to provide its services to the same Clearing Corporations for a period of 3 years.

12 · 20.6. Once the accreditation of a WSP is cancelled by a Clearing Corporation then it shall not be eligible to provide its services to any other Clearing Corporation for 3 years.

12 · 20.7. Adequate notice intimation to general public / clients should be given by the Clearing Corporation through widely published newspapers and website etc. before accepting the surrender of WSP or cancellation of the WSP.

12 · 21. Business Continuity Plan

12 · 21.1. A Clearing Corporations shall ensure that the WSP shall put in place, a business continuity plan and submits such plan to the Clearing Corporations.

12 · 22. Actions against WSPs

12 · 22.1. The Clearing Corporation may frame norms for its accredited WSPs to rectify or correct their misconduct or misconduct on the part of any of its approved warehouses used for storing goods for delivery on exchange platform. The Clearing Corporation may also direct the WSPs to indemnify an entity aggrieved by the delivery process of its 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:

12 · 22.2.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 seller from exercising, in whole or in part, their rights. The Clearing Corporation shall compensate the aggrieved client for any such losses that have been appropriately established by debiting the FSD of WSP held with the CC, in accordance with its applicable rules, and WSP shall within 7 days replenish the FSD as required.

12 · 23. Policy for depositors for rejection of goods

12 · 23.1. The Clearing Corporations shall frame a policy for rejection of goods deposited by the depositors.

12 · 24. Disclosures by Clearing Corporations

12 · 24.1. Daily disclosure on the following:

12 · 24.2. Monthly disclosure on the following:

12 · 24.3. Other periodical disclosures:

12 · 24.4. The archives of above reports shall be available on the website of Clearing Corporation/ Stock Exchange.

13 · 1. Investor Protection Fund (IPF) 125

13 · 1.1. Constitution and Management of the Investor Protection Fund ("IPF")

13 · 1.2. Contributions to the IPF: The IPF will be funded as follows:

125 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2016/94 dated September 26, 2016 .

126 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

127 · SEBI circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

128 · SEBI circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

129 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

13 · 1.3. Manner of filing/inviting claims from the Investors/Clients

13 · 1.4. Eligibility of Claims

130 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

131 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

13 · 1.5. Determination of Legitimate Claims

13 · 1.5.1. The Stock Exchanges shall ensure that once a member has been declared defaulter, the claim(s) shall be placed before the Member Core Settlement Guarantee Fund Committee ( " MCSGFC"), the erstwhile Defaulters' Committee , for sanction and ratification. MCSGFC's advice w.r.t. legitimate claims shall be sent to the IPF Trust for disbursement of the amount immediately.

13 · 1.5.2. In case the claim amount is more than the coverage limit under IPF or the amount sanctioned and ratified by the MCSGFC is less than the claim amount then the investor shall be at liberty to prefer for arbitration outside the stock exchange mechanism / any other legal forum outside the stock exchange mechanism for claim of the balance amount. 134

13 · 1.5.3. In the event of default by the member, all transactions executed on the stock exchange platform shall be eligible for settlement from IPF subject to the appropriate norms laid down by the defaulters' committee. The IPF of the stock exchange

132 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

133 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

134 · SEBI Circular no. SEBI/HO/CDMRD/DoC/P/CIR/2021/651 dated October 22, 2021 .

13 · 1.5.4. The stock exchanges shall also use their IPF for meeting their liabilities towards the clients of members not registered with SEBI, if the same is allowed under the byelaws of the stock exchange. 136

13 · 1.6. Threshold limit for Claims

13 · 1.7. Disbursements of claims from the IPF

135 · SEBI Circular No. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

136 · SEBI Circular no. CIR/HO/CDMRD/DCE/CIR/P/2018/49 dated March 14, 2018 .

137 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

138 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

139 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

140 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

141 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

13 · 1.8. Income earned on IPF and its Utilization143:

142 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017 .

143 · SEBI Circular no. CIR/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017.

13 · 2. Investor Service Fund (ISF) 145

13 · 2.1. Stock Exchanges are mandated to set up Investor Service Fund ( " ISF " ) for providing following basis minimum facilities at various Investor Service Centers ( " ISCs " ).

144 · SEBI Circular no. CIR/HO/CDMRD/DCE/CIR/P/2018/49 dated March 14, 2018 .

145 · SEBI Circular no. CIR/HO/CDMRD/DEICE/CIR/P/2017/53 dated June 13, 2017 .

13 · 2.2. Contribution to ISF

14 · 1. Investor Grievance Redressal System 146

14 · 1.1. The stock exchanges shall constitute Investor Grievance Redressal Committee ( " IGRC " ) for redressal of investor grievances.

14 · 1.2. The composition of the IGRC shall be as follows: -

146 · SEBI Circular No. CIR/CDMRD/DEICE/02/2015 dated November 16, 2015.

147 · SEBI Circular No. CIR/CDMRD/DEICE/CIR/P/2017/77 July 11, 2017.

148 · SEBI Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated November 6, 2020.

14 · 1.3. With a view to streamline and make more effective the investor grievance redressal mechanism at stock exchange, it has been decided to shorten the time taken for the proceedings as well as to give monetary relief to the investors, during the course of pendency of proceedings. In this regard, Stock Exchanges are advised as under:

149 · SEBI Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated November 6, 2020.

150 · SEBI Circular No. SEBI/HO/MIRSD/DOC/CIR/P/2020/226 dated November 6, 2020.

151 · SEBI Circular No. CIR/CDMRD/DEICE/CIR/P/2017/77 dated July 11, 2017

152 · SEBI Circular No. SEBI/HO/CDMRD/DoC/P/CIR/2021/649 dated October 22, 2021 .

34 · of the Arbitration and Conciliation Act, 1996 to set aside the appellate arbitration award, then a positive difference of, 75% of the amount mentioned in the appellate arbitration award or INR 5 lakhs, whichever is less, and the amount already released to the client at clause (i) and (ii) above, shall be released to the client from IPF of the Stock Exchange.

14 · 1.4. With a view to rationalize the timelines involved in the arbitration mechanism, stock exchanges are advised as under:

14 · 1.5. With a view to address complaints regarding 'unauthorised trades' , the stock exchanges shall direct the Members to put in place the following:

14 · 2. Online Web Based Complaints Redressal System 153

14 · 2.1 SEBI has implemented an online platform known as SEBI Complaints Redressal System ( " SCORES " ) designed to help investors to lodge their complaints, pertaining to securities market, against listed companies and SEBI registered intermediaries .

14 · 2.2 In line with the same, to enable investors to lodge and follow up their complaints and track the status of redressed of such complaints from anywhere, all Stock Exchanges shall implement an online web based complaints redressal system of their own, which shall facilitate investors to file complaints and escalate complaints for redressal through IGRC, arbitration, appellate arbitration etc. in accordance with their respective byelaws, rules and regulations. The system shall be web enabled and provide online access 24 x 7 with the following salient features;

153 · SEBI Circular No. SEBI/HO/MRD1/ICC1/CIR/P/2022/94 dated July 04, 2022.

14 · 3.Increasing Awareness regarding Online Mechanisms for Investor Grievance Redressal154

14 · 3.1 In order to increases the awareness regarding SCORES, all Stock Exchanges /Clearing Corporations shall display the following on the home page of their websites and mobile apps:

14 · 4. Hybrid Mode of Conducting GRC and Arbitration / Appellate Arbitration155

14 · 4.1 During the COVID pandemic, Stock Exchanges were advised to conduct IGRC and arbitration/ appellate arbitration meetings/hearings online for faster redressal of complaints. The online process of IGRC and arbitration/ appellate arbitration saves time and cost of the parties involved which is in the interest of investors.

154 · SEBI Circular No. SEBI/HO/MRD1/MRD1_ICC1/P/CIR/2022/05 January 05, 2022.

155 · SEBI Circular No. SEBI/HO/MRD1/ICC1/CIR/P2022/94 dated July 04, 2022

14 · 4.2 Therefore, Stock Exchanges shall continue with the hybrid mode (i.e., online and offline) of conducting IGRC and arbitration/ appellate arbitration process.

14 · 5. Disclosure of Complaints against the Stock Exchange(s)and the Clearing Corporation(s) 156

14 · 5.1. In order to bring about transparency in the Investor Grievance Redressal Mechanism, all the Stock Exchanges and the Clearing Corporations shall disclose on their websites, the data on complaints received against them and redressal thereof, latest by 7

14 · 6. Arbitration mechanism 157

14 · 6.1.For any dispute between the member and the client relating to or arising out of the transactions in Stock Exchange, which is of civil nature, the complainant/ member shall first refer the complaint to the IGRC and/ or to arbitration mechanism provided by the Stock Exchange before resorting to other remedies available under any other law. 158The Bye-laws of the stock exchanges relating to arbitration proceedings shall be in accordance with the Arbitration and Conciliation Act, 1996 and this Master Circular .

14 · 6.2.In consultation with the stock exchanges, it has been decided to streamline the arbitration mechanism available at exchanges for arbitration of disputes (claims, complaints, differences, etc.) arising between a client and a member (Broker, Trading Member and Clearing Member) across various market segments.

14 · 6.3.A stock exchange shall provide an arbitration mechanism for settlement of disputes between a client and a member through arbitration proceedings in accordance with the provisions of this Master Circular read with Section 2(4) of the Arbitration and Conciliation, Act, 1996.

156 · SEBI Circular No. SEBI/HO/CDMRD/DoC/P/CIR/2021/636 dated October 04, 2021

157 · SEBI Circular No. CIR/CDMRD/DEICE/CIR/P/2017/77 dated July 11, 2017

158 · SEBI Circular No. SEBI/HO/MIRSD/DOS3/P/CIR/2022/78 dated June 3, 2022

14 · 6.4.Maintenance of a Panel of Arbitrators.

14 · 6.5. Code of Conduct for Arbitrators: An arbitrator shall –

14 · 6.6. Arbitration

159 · SEBI Circular No. SEBI/HO/MIRSD/DOS3/P/CIR/2022/78 dated June 3, 2022

160 · SEBI Circular No. SEBI/HO/MIRSD/DOS3/P/CIR/2022/78 dated June 3, 2022

161 · SEBI Circular No. SEBI/HO/MIRSD/DOS3/P/CIR/2022/78 dated June 3, 2022

14 · 6.7. Appellate Arbitration

14 · 6.8. Arbitration Fees162 : The fee structure (exclusive of statutory dues -stamp duty, service tax, etc.) for filing arbitration reference shall be as follows: -

162 · SEBI Circular No. CIR/CDMRD/DEICE/CIR/P/2017/77 dated July 11, 2017.

163 · Substituted by SEBI Circular No. SEBI/HO/MRD1/ICC1/CIR/P/2022/94 date July 04, 2022

14 · 6.9. Place of Arbitration / Appellate Arbitration

14 · 6.10.In case, the award amount is more than INR 50 lakhs, the next level of proceedings (arbitration or appellate arbitration) may take place at the nearest metro city, if so desired by any of the parties involved. The additional statutory cost for arbitration, if any, shall be borne by the party desirous of shifting the place of arbitration. 164

14 · 6.11.Speeding up grievance redressal mechanism: In order to have faster implementation of award and to discourage delayed filling of arbitrations by members, the additional fees payable by members who file their claim beyond the prescribed time-lines shall be nonrefundable even if the arbitration award goes in favour of the member165 . The additional fees charged from the members, if the claim is filed beyond the prescribed timeline, if any, shall be deposited in the IPF of the respective Stock Exchange. 166

14 · 6.12.Public dissemination of profiles of arbitrators: In order to enhance transparency and also to provide choice to parties, Stock Exchanges shall disseminate information w.r.t. brief profile, qualification, areas of experience/ expertise, number of arbitration matters handled, pre-arbitration experience, etc. of the arbitrators on their website.

164 · SEBI Circular No. SEBI/HO/CDMRD/DoC/P/CIR/2021/649 dated October 22, 2021

165 · SEBI Circular no. CIR/CDMRD/DCE/CIR/P/2018/48 dated March 14, 2018

166 · SEBI Circular no. SEBI/HO/CDMRD/DoC/P/CIR/2021/649 dated October 22, 2021

14 · 6.13.Submission of documents in soft copies: In order to assist the arbitrators in pronouncing comprehensive and speedy awards, Stock Exchanges shall make necessary arrangements in terms of hardware viz., computer, scanner, printer, etc. and required software's at exchange offices/ ISCs to facilitate the clients to type/ convert their documents into electronic format/ soft copy. Such electronic format/ soft copies shall be provided to the arbitrators along with original submissions in physical copies.

14 · 6.14.Review and training of arbitrators

14 · 6.15.Mechanism for implementation of award.

14 · 6.16.Empanelment of arbitrators and segregation of arbitration and appellate arbitration panel:

167 · SEBI Circular No. CIR/CDMRD/DCE/CIR/P/2018/48 dated March 14, 2018

14 · 6.17.Revision in professional fee of arbitrators: The arbitrator fee shall be upwardly revised to INR 18,000/- per case. Consequent to this upward revision, the additional expenses attributable to a client over and above the fee structure as specified above in Arbitration Fees, shall be borne by the client (wherever applicable) and the Stock Exchange equally. The total expense attributable to the member has to be borne by the concerned member only .

14 · 6.18.Arbitration / Appellate Arbitration award: In order to safeguard the interest of the parties involved in arbitration and to ensure speedy implementation of the arbitration award, the rate of interest on the award passed by arbitrators shall be in compliance with Arbitration and Conciliation (Amendment) Act, 2015.

14 · 6.19.Committees 168 : The composition and functions of the various committees has been referred to as in Chapter 15 .

14 · 6.20.Automatic Process and Common Pool of arbitrators169: The stock exchanges shall pool all arbitrators of theirs in the common pool and facilitate automatic selection of arbitrators from the common pool. Details are specified below:

168 · As per Regulation 29 of SECC Regulations, the regulatory committees at MIIs has been rationalized into three functional committees and four oversight committees within each MIIs including functions of Disciplinary Action Committee, Defaulter's Committee and Investors Service Committees. SEBI vide circular SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/13 dated January 10, 2019 had issued guidelines for the principles for composition and quorum of the various committees at MIIs.

169 · SEBI Circular No. CIR/CDMRD/DIECE/02/2015 dated November 16, 2015

14 · 6.21.Implementation of Arbitral Award in favour of Clients

14 · 6.22.Record and Disclosures

15 · 1. Compliance with various provisions of Securities Laws by Stock Exchanges having Commodity Derivatives Segment 170

15 · 1.1. Stock exchanges shall comply with the applicable provisions of the Securities Contracts (Regulation) Act, 1956 ("SCRA") , the Securities Contracts (Regulation) Rules, 1957 ("SCRR"), the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, ( " SECC Regulations " ) and this Master Circular 171 :

170 · SEBI Vide gazette notification dated October 3, 2018 notified the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 [SECC Regulations, 2018] and SEBI (Depositories and Participants) Regulations, 2018 [SEBI (D&P) Regulations, 2018] and repealed SECC Regulations, 2012 and SEBI (D&P) Regulations, 1996.

171 · Subsequent to the changes in SECC Regulations, corresponding modifications/omissions required in various provisions of SEBI Circular No CIR/CDMRD/DEA/03/2015, dated November 26, 2015 have been incorporated in master circular.

15 · 2. Commencement of operations by a newly recognized stock exchange/ Clearing Corporation 172

15 · 2.1. After grant of recognition, the stock exchange can commence trading operations with a minimum of 25 trading members and the clearing corporation can commence clearing and settlement operations with a minimum of 10 clearing members.

15 · 3. Statutory Committees 173

15 · 3.1. As per Regulation 29 of the SECC Regulations, , the regulatory committees at Stock Exchanges and Clearing Corporations have been rationalized into three functional committees and four oversight committees within each Stock Exchanges and Clearing Corporations. The functions of the seven committees, along-with the detailed composition of each committee is provided in Annexure W on Functions and Composition of Statutory Committee .

15 · 3.2. The overarching principles for composition and quorum of the statutory committee at Stock Exchanges and Clearing Corporations shall be as under, which shall be applicable to all committees with an exception for Investor Grievance Redressal Committee ( " IGRC " ) and Advisory Committee:

172 · SEBI circular no SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/13 dated January 10, 2019

173 · SEBI circular no SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/13 dated January 10, 2019

15 · 3.3. Stock Exchanges and Clearing Corporations shall adhere to the following:

15 · 4. Monthly Development Report 174

15 · 4.1. The stock exchanges shall submit a Monthly Development Report ( " MDR " ) as per the prescribed format to SEBI by 7 th of the succeeding month for their commodity derivatives segment.

15 · 4.2. The format for the MDR is provided at Annexure X Format for Monthly Development Report .

15 · 5. Mandatory requirements / exit policy 175

15 · 5.1. If there is no trading operation on the platform of any stock exchanges for more than twelve months, then such exchange shall be liable to exit.

15 · 5.2. In addition to the above, henceforth, all stock exchanges shall continuously meet the turnover criteria of INR 1000 crores per annum. In case the stock exchange fails to meet the above criteria for 2 consecutive years, they shall be liable to exit. 176

15 · 5.3. In the event a stock exchange, for any reason suspends its trading operations, it shall resume its trading only after ensuring that adequate and effective trading systems, clearing and settlement systems, monitoring and surveillance mechanisms, risk management systems are put in place and only after complying with all other regulatory requirements stipulated by SEBI from time to time. Further, such stock exchanges shall resume trading operations only after obtaining prior approval from SEBI.

15 · 5.4. In case any stock exchange proposes to surrender its recognition voluntarily or whose recognition is proposed to be withdrawn by SEBI, the concerned stock exchange shall be directed to comply with the following:

174 · SEBI Circular No CIR/CDMRD/DEA/4/2015 , dated December 9, 2015

175 · SEBI Circular No. CIR/CDMRD/DEA/01/2016, dated January 11, 2016

16 · 1. Algorithmic Trading 177

16 · 1.1. Any order that is generated using automated execution logic shall be known as algorithmic trading .

16 · 1.2. The stock exchanges shall have arrangements, procedures and system capability to manage the load on their systems in such a manner so as to achieve consistent response time to all members. The capacity of the trading system of the stock exchange should be at least four times the peak order load encountered and the Exchange system should be upgraded on a regular basis. The stock exchange shall continuously study the performance of its systems and, if necessary, undertake system upgrade, including periodic upgrade of its surveillance system, in order to keep pace with the speed of trade and volume of data that may arise through algorithmic trading.

16 · 1.3. While approving the algorithmic trading, the stock exchanges shall ensure that:

177 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/97 dated September 27, 2016

16 · 1.4. As mini and micro contracts are targeted towards small participants, while allowing algorithmic trading in mini and micro contracts, stock exchange should exercise caution and permit algorithmic trading only after taking into account liquidity in the contract and ascertaining that it will not put small participants in disadvantage.

16 · 1.5. Algorithmic trading shall not be permitted from stock exchange hosted CTCL terminals.

16 · 1.6. In order to ensure orderly trading in the market and fair usage of the trading platform by all the members, stock exchanges shall put in place the following economic disincentives for daily algorithmic order– r– to – trade ratio:

16 · 1.7. The Stock Exchange shall place a limit (X) on the numbers of orders per second from a particular CTCL ID/ATS User-ID not exceeding one hundred and twenty orders per second. Compliance with the limit "X" so set by a particular CTCL ID/ATS User-ID shall be measured over a rolling period of five seconds (i.e., 5X orders for 0th – – 5th second, 5X orders for 1st-6th second, 5X orders for 2nd to 7th second and so on).

16 · 1.8. The limit on OPS may be further relaxed by the Stock Exchanges based on the increased peak order load observed and corresponding upgrade of infrastructure capacity to ensure that the capacity of trading system of the Stock Exchange remains at least four times the peak order load. The relaxation in limit shall be subject to approval of SEBI.

16 · 1.9. The stock exchanges shall ensure that all algorithmic orders are necessarily routed through members' servers located in India and through specified CTCL ID/ATS User–ID approved by the stock exchange for algorithmic trading. The stock exchanges shall also

178 · SEBI Circular No. SEBI/HO/CDMRD/CDMRD_DRM/P/CIR/2022/30 dated March 17, 2022.

16 · 1.10.The stock exchange shall have appropriate multi-layer risk control mechanism to address the risk emanating from algorithmic orders and trades. The minimum order – – level risk controls shall include the following.

16 · 1.11.In the interest of orderly trading and market integrity, the stock exchanges shall put in place a system to identify dysfunctional algorithms (i.e. algorithms leading to loop or runaway situation) and take suitable measures, including advising the member, to shut down such algorithms and remove any outstanding orders in the system that have emanated from such dysfunctional algorithms. Further, in exigencies, the stock exchange should be in a position to shut down the member's terminal.

16 · 1.12.The stock exchange may seek details of algorithmic strategies to be used by the members for purposes of inquiry, surveillance, investigation etc.

16 · 1.13.Any event leading to slow down or trading halt or any other abnormal development shall be immediately reported to Integrated Surveillance Department of SEBI with full details.

16 · 1.14.The stock exchanges shall ensure that the member shall provide the facility of algorithmic trading only upon the prior written permission of the stock exchange. While considering such

16 · 1.15.The other risk management checks already put in place by the stock exchange shall continue and the stock exchange may reevaluate such checks if deemed necessary in view of algorithmic trading.

16 · 1.16.Stock Exchanges shall have an effective surveillance mechanism to ensure that only approved algorithmic strategies are used.

16 · 1.17.Stock Exchanges shall further ensure that their members providing the facility of algorithmic trading comply with the provisions of these guidelines. The stock exchange shall specifically ensure that:

179 · SEBI circular no SEBI/HO/CDMRD/DRMP/CIR/P/2018/60 dated April 03, 2018.

16 · 1.18.The stock exchange shall report details regarding algorithmic trading to SEBI in in its Monthly Development Report inter-alia incorporating turnover details of algorithmic trading, algorithmic trading as percentage of total trading, number of members/ clients using algorithmic trading, action taken in respect of dysfunctional algos, status of grievances if any, received and processed, etc.

16 · 2. Co -Location 180

16 · 2.1. Co -Location, Co–Hosting or any other facility or arrangement which puts some members in disadvantageous position vis-à-vis other members is not allowed in the commodity derivatives segment.

16 · 3. System and Network Audit 181

180 · SEBI circular no SEBI/HO/CDMRD/DMP/CIR/P/2016/97 dated September 27, 2016

181 · SEBI Circular No. SEBI/HO/MRD1/MRD1_DTCS/P/CIR/2022/58 dated May 02, 2022

16 · 4. Business Continuity Plan (BCP) and Disaster Recovery (DR) 182

16 · 4.1 With advancement in technology and improved automation of processes, the extant framework for Business Continuity Plan (BCP) and Disaster Recovery Site (DRS) for Stock Exchanges, Depositories and Clearing Corporations was re-examined with a view to reducing the time period specified for moving from Primary Data Centre(PDC) to DRS.

16 · 4.2 Upon examination and based on consultation with MIIs and Technical Advisory Committee (TAC) of SEBI, the modified framework for BCP and DR shall be as under:

182 · SEBI Circular No. SEBI/HO/MRD1/DTCS/CIR/P/2021/33 dated March 22, 2021

16 · 4.3 Configuration of DRS/NS with PDC

16 · 4.5 DR drills/Testing

16 · 4.6 BCP – DR Policy Document

16 · 5. Annual System Audit of Stock Brokers / Trading Members 183

16 · 5.1. The stock exchanges should ensure that system audit of stock brokers/ trading members are conducted in accordance with the prescribed framework as placed at Annexure ZC Stock Broker System Audit Framework .

16 · 5.2. Stock Exchanges are advised to keep track of findings of system audits of all brokers on quarterly basis and ensure that all major audit findings, specifically in critical areas, are rectified / complied in a time bound manner failing which follow up inspection of such brokers may be taken up for necessary corrective steps / actions thereafter, if any.

16 · 5.3. Stock Exchanges should report all major non-compliances / observations of system auditors, broker wise, on a quarterly basis to SEBI.

16 · 5.4. Further, it was decided that Type I brokers may be exempted from system audit and the development of NEAT / BOLT / Stock Exchange provided terminals be included in the scope of Annual System Audit of stock exchanges with Commodity Derivatives segment.

183 · SEBI Circular No. SEBI/HO/CDMRD/DEICE/CIR/P/2016/70 dated August 11, 2016

16 · 5.5. In view of above, the provisions relating to Type I Brokers, as mentioned in this Master Circular, shall not be applicable to Type I Brokers. However, such provisions shall be included in the TOR of the Annual System Audit for stock exchanges with Commodity Derivatives segment.

16 · 6.Testing of software used in or related to Trading and Risk Management 184

16 · 6.1. Due to technological developments and innovations, currently the members of stock exchanges have multiple options for using software i.e. either stock exchange provided or in-house developed software which is being used for trading and risk management related activities. Since new software or changes to the existing software without proper testing may affect the integrity of the markets, it has been decided to make the applicable the following provisions to commodity derivatives markets.

16 · 6.2. 'Software' shall mean electronic systems or applications used by stock brokers / trading members for connecting to the stock exchanges and for the purposes of trading and real-time risk management, including software used for Internet Based Trading (IBT), Direct Market Access (DMA), Securities Trading using Wireless Technology (STWT), Smart Order Routing (SOR), Algorithmic Trading (AT), etc.

16 · 6.3. Testing of Software: In addition to the testing and approval requirements specified through various circulars issued by SEBI on IBT, DMA, STWT, SOR and AT, stock exchanges shall frame appropriate testing policies for functional as well as technical testing of the software. Such framework shall at the minimum include the following:

184 · SEBI Circular No. CIR/CDMRD/DEICE/03/2015 dated December 11, 2015

185 · Inserted vide SEBI Circular No. SEBI/HO/MRD1/DSAP/CIR/P/2020/234 dated November 24, 2020.

16 · 6.4. Brokers / trading members shall also engage system auditor(s) to examine reports of mock tests and UAT in order to certify that the tests were satisfactorily undertaken.

16 · 6.5. Stock exchanges shall monitor compliance of stock brokers / trading members, who use trading algorithm, with regard to the requirement of participation in mock trading session. In cases where stock exchanges find that the stock broker / trading member has failed to participate in such mock trading sessions, stock exchange shall call for reasons and if found unsatisfactory, shall

16 · 6.6. Stock exchanges shall also ensure that the system auditors examine the compliance of stock broker / trading member, who use trading algorithms, with regard to the requirement of participation in mock trading session, as mandated with this circular, and provide suitable comments in the periodic system audit report. In cases where the system audit report indicate that the stock broker / trading member has failed to participate in such mock trading sessions, stock exchange shall call for reasons from the broker/trading member and if found unsatisfactory, shall suspend the proprietary trading rights of the broker / trading member for a minimum period of one trading day.

16 · 6.7. For pre-approval / periodic system audit of Computer-to-Computer Link ( " CTCL " ) or Intermediate Messaging Layer (IML), IBT, DMA, STWT, SOR and AT, brokers / trading members shall engage a system auditor with any of the following certifications:

16 · 6.8. Approval of Software of broker / trading member

16 · 6.9. In order to ensure that brokers are not using software without requisite approval, stock exchanges are advised to put in place suitable mechanism to prevent any unauthorized change to the approved software.

16 · 6.10.Undertaking to be provided by brokers / trading members

16 · 6.11.Sharing of Application Programming Interface (API) specifications by the exchange with brokers / trading members.

16 · 6.12.Penalty on malfunction of software used by broker / trading member: Stock exchanges with commodity derivatives segment shall examine the cases of malfunctioning of software used by brokers / trading members and apply deterrent penalties in form of fines or suspension to the stock broker/trading member whose software malfunctioned. In addition, brokers/trading members shall implement various mechanisms including the following to minimize their losses in the event of software malfunction:

16 · 6.13.With regard to changes / updates to broker's trading software that intend to modify the 'look and feel' and do not affect the risk management system of the broker or the connectivity of the trading software with exchange's trading system, it is clarified that mock testing and consequent system audit may not be insisted upon by the exchanges.

16 · 6.14.Stock exchanges shall direct their brokers to put in place adequate mechanism to restore their trading systems to 'production state' at the end of testing session so as to ensure integrity of stock brokers' trading system.

16 · 7. Cyber Security and Cyber Resilience framework 186

16 · 7.1. SEBI as a member of IOSCO has adopted the Principles for Financial Market Infrastructures (PFMIs) laid down by CPMI IOSCO and has issued guidance for implementation of the principles in the securities market.

16 · 7.2. Principle 17 of PFMI that relates to management and mitigation of 'Operational risk' requires that systemically important market infrastructures institutions "should identify the plausible sources of

186 · SEBI Circular No. SEBI/HO/CDMRD/DEICE/CIR/P/2016/0000000044 dated March 29, 2016

16 · 7.3. Stock exchanges with commodity derivatives segment are referred to as Market Infrastructure Institutions or MIIs are systemically important market infrastructure institutions. As part of the operational risk management, these MIIs need to have robust cyber security framework to provide essential facilities and perform systemically critical functions relating to trading, clearing and settlement in securities market.

16 · 7.4. Stock exchanges with commodity derivatives segment are required to comply the framework with regard to cyber security and cyber resilience as placed at Annexure ZD on Cyber Security and Cyber Resilience framework .

16 · 7.5. The Stock Exchanges and Clearing Corporations are mandated to conduct comprehensive cyber audit at least 2 times in a financial year. Along with the Cyber audit reports, henceforth, all Stock Exchanges and Clearing Corporations are directed to submit a declaration from the MD/ CEO certifying compliance by the Stock Exchange/ Clearing Corporation with all SEBI Circulars and advisories related to Cyber security issued from time to time.187

187 · Inserted vide SEBI Circular No. SEBI/HO/MRD1/MRD1_DTCS/P/CIR/2022/68 dated May 20, 2022

16 · 8 Handling of Technical glitches by Market Infrastructure Institutions (MIIs) and payment of "Financial Disincentive " 188

16 · 8.1. Considering the criticality of smooth functioning of systems of MIIs (as any disruption adversely impacts all classes of investors / market participants as well as the credibility of the securities market), specifying a pre-defined threshold for downtime of systems of MIIs becomes desirable. For any downtime or unavailability of services, beyond such pre-defined time, there is a need to ensure that "Financial Disincentive" is paid by the MIIs as well as Managing Director (being the executive head in-charge of all the day to day operations) and Chief Technology Officer (being the executive head in -charge of technology) of the MII. This will encourage MIIs to constantly monitor the performance and efficiency of their systems and upgrade/ enhance their systems etc. to avoid any possibility of technical glitches/disruption/disaster and restart their operations expeditiously in the event of glitch/disruption/disaster.

16 · 8.2. Accordingly, MIIs shall:

16 · 8.3 The aforesaid "Financial Disincentives", when triggered automatically under predefined conditions, as detailed in Annexure-ZF of this Circular, shall be credited to the Investor Protection Fund / Core Settlement Guarantee Fund maintained by the MII.

188 · SEBI Circular No. SEBI/HO/MRD1/DTCS/CIR/P/2021 dated July 05, 2021

1 · : Poor

2 · : Reasonable

3 · : Good

4 · : Very Good

5 · : Excellent

1 · Peak Historical Return

2 · Peak historical price volatility

3 · Augmented historical

189 · Inserted vide circular no. SEBI/HO/CDMRD/DRMP/CIR/P/2020/244 dated December 21, 2020

4 · Stressed MPOR

5 · Stressed PSR and VSR

190 · Inserted via SEBI Circular No SEBI/HO/CDMRD/DRMP/CIR/P/2020/128 dated July 21, 2020

191 · Amended vide SEBI Circular no. SEBI/HO/CDMRD_DOP/P/CIR/2021/592 dated July 08, 2021 Prior to the amendment, the requirement was of 30 days.

192 · Amended vide SEBI Circular no. SEBI/HO/CDMRD_DOP/P/CIR/2021/592 dated July 08, 2021 Prior to the amendment, the requirement was of 30 days.

3 · The Audit report should cover each of the major areas mentioned in the TOR and compliance with SEBI circulars/directions/advices, etc. related to technology. The Auditor in the Audit Report shall give its views indicating the NCs to the standards or observations or suggestions. For each section, auditors should also provide qualitative inputs/suggestions about ways to improve the processes, based upon the best industry practices.

2 · 1. Organization details

2 · 2. IT and network set up and usage

3 · 1. Whether IT Governance framework exists to include the following:

3 · 2. IT policies and procedures

3 · 3. Whether the above mentioned SOPs is reviewed at periodic intervals or upon the occurrence of any major event? In this regard, whether any organization policy has been formulated by the MII?

4 · Business Controls

4 · 1. General Controls for Data Centre Facilities

4 · 2. Software change control

4 · 3. Data Communication/ Network Controls

4 · 4. Security Controls

4 · 5. Access Policy and Controls

4 · 6. Electronic Document Controls

4 · 7. General Access Controls

4 · 8. Performance Audit

4 · 9. Business Continuity / Disaster Recovery Facilities

4 · 10. IT/Network Support & IT Asset Management

6 · 1. Screening of Employee, Third party vendors / contractors

6 · 2. On boarding

6 · 3. Off boarding

6 · 4. Consequence Management (Incident / Breach of policies)

6 · 5. Awareness and Trainings

6 · 6. Non -Disclosure Agreements (NDAs) and confidentiality agreement

7 · Network audit

7 · 1The audit shall cover entire network infrastructure which shall inter -alia includes physical verification and tracing of the connectivity paths, server configuration, physical checking wire to wire connectivity and configurations of computer networking devices etc.

7 · 2The audit shall require tracing of the connectivity and network diagram based on the physical audit.

7 · 3The audit shall cover the link, the path, device-level redundancy, no single-point failures, high availability, and fault tolerance aspects in the network.

7 · 4The audit shall cover entire network that is used to connect members to the MIIs (POP, MPLS, VSAT, COLO, etc.)

7 · 5The audit shall cover applications, internal networks, servers, etc. of the MIIs/offered by the MIIs to its members that are used for trading, risk management, clearing and settlement etc.

7 · 6Network performance and design

7 · 7Network Security implementation

7 · 8Network health monitoring and alert system

7 · 9Log management process

7 · 10 Service level definition for vendor’s/Service level management

7 · 11 Governance process for network service delivery by vendors

9 · 1. Identification of eligible vendors

9 · 2. Dissemination process of Request for Proposal (RFP)

9 · 3. Definition of criteria of evaluation

9 · 4. Process of competitive analysis

9 · 5. Approach for selection

9 · 6. Escrow arrangement for keeping source code

10 · 1. Existence of policy for the acceptable use of electronic mail

10 · 2. Regulations governing file transfer and exchange of messages with external parties

10 · 3. Rules based on which e -mail addresses are assigned

10 · 4. Storage, backup and retrieval

11 · 1. Ageing analysis of technology complaints

11 · 2. Whether all complaints received are brought to their logical conclusion?

12 · 1. Electronic Waste Disposal

12 · 2. Observation(s) based on previous Audit Report (s)

12 · 3. Any other specific area(s) that may be informed by SEBI

2 · 1.With regard to incidents resulting in business disruption, the following shall be submitted by the MIIs to SEBI:

2 · 2.All communication and information with regard to technical glitch shall be shared by the MII with SEBI through a dedicated e-mail id viz. techglitch@sebi.gov.in

2 · 3.With regard to the incidents wherein business is disrupted, the RCA and corrective action taken, as submitted by the MII, shall be placed before TAC of SEBI. TAC/ SEBI, if it so desires, may seek additional information/ clarification from the MII regarding the technical glitch.

2 · 4.In case TAC finds the actions taken by the MII as inadequate, then, based on the recommendations of TAC, the MII shall be required to address the technical glitch by taking appropriate corrective actions, within the timeline specified by TAC/SEBI. While deciding such timeline, criticality of the malfunction and/or the services/ applications affected by the same shall also be taken into consideration

5 · Further, if an MII fails to restore operations of Critical Systems including from Disaster Recovery Site within three hours from the occurrence of the disaster, the following additional "financial disincentive" (over and above S No 3 or 4 above) shall be paid: