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TMI BlogCriteria for Eligibility, Retention and re-introduction of derivative contracts on CommoditiesX X X X Extracts X X X X X X X X Extracts X X X X ..... (not necessarily of just commodities), needs to be ascertained. 2. The Commodity Derivatives Advisory Committee (CDAC), constituted for advising SEBI on matters concerning effective regulation and development of the commodity derivatives market, on the above aspects had inter alia, recommended that: 2.1. The commodities which are to be recommended by SEBI for notification by the Government or on which the exchange proposes to launch a contract should pass through some test based upon the objective parameters and upon satisfaction, should be allowed for trading. 2.2. It is also important that the contracts available for trading in the commodity derivatives market are liquid enough for the contracts to trade smoothly. 3. Though it may n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er price discovery. Durability i.e. higher shelf life makes commodity conducive for storage, which creates opportunity for cash and carry and hence would attract arbitragers thus make it more suitable for derivatives trading. II. Trade Factors * Global: Global market in a commodity could be a positive indicator as internationally linked commodity prices are influenced by various global factors and thus create multiple reference points for price discovery which may make it conducive for derivatives trading. * Value chain: The term ''value chain'' describes the full range of value adding activities required to bring a product or service through the different phases of production, including procurement of raw materials and other inputs", ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trading. * Seasonality: The Indian commodity sphere is characterized by seasonality. The prices fluctuate with the supply season and the off season. The derivatives market is necessary to even out this fluctuation and facilitate better price discovery. Thus the commodities with higher seasonality are conducive for derivatives trading. * Price Volatility: Commodities with high volatility of prices have high need for hedging. Such commodities are conducive for Derivatives trading. b) In order to bring in uniformity among the commodity derivatives exchanges, the indicative template as enclosed at Annexure A shall be adopted by the exchanges. In this regard the exchanges shall decide upon the specific numerical weightages as approved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atform, shall not be re-considered by the concerned exchange for re-launching of derivatives contract on such commodity at least for a minimum period of one year. 4. The provisions of this circular shall come into effect from the date of the circular except for the provisions listed out at 3.3 above which will be effective from April 01, 2017. 5. This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 6. The Exchanges are advised to: i. To make necessary amendments to the relevant bye-laws, rules and regulations. ii. Bring the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in a regulated environment to be best in class globally. Minimum Support Price (MSP) for the commodity Storage controls/ Stock Limits Government. Policy Applicability of other Laws Parameter II Score = Section II Particulars Weight Sub-score Details Parameter III - Trade/ Business Global Trade - Imports or Exports Importance in global trade and to our economy. Ability to add value to the base commodity. Commercial application, nature of buyers, Supply/demand gap etc. Domestic market / Geographical coverage Presence of Value Chain participants (VCPs) Supply/ Demand Parameter III Score Particulars Weight Sub-score Details Parameter IV - Risk Management Correlation The risk parameters viz., volatility, correlation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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