SEBI Asks Exchanges To Annually Review Commodity Derivatives Contracts’ Performance
Traders conduct transactions at the Commodities and Futures Exchange in Sao Paulo, Brazil (Photographer: Marcos Issa/Bloomberg News)

SEBI Asks Exchanges To Annually Review Commodity Derivatives Contracts’ Performance

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Securities and Exchange Board of India has asked the stock exchanges to review the performance of all contracts in the commodity derivatives segment on annual basis for each financial year and disclose it by June 30 of the following financial year.

The performance review shall be consulted with the Product Advisory Committee, the markets regulator said in a circular.

"The circular would be effective from April 01, 2020. The stock exchanges shall be required to undertake and disclose performance review of all contracts traded on their exchange from FY 2019-20," it added.

SEBI said the performance review along with the methodology adopted in evaluation has to be disclosed by the stock exchanges on their website prominently. The regulator has also given parameters for performance review of the commodity derivatives.

The parameters include background of the commodity like brief about the commodity, its sample picture, lifecycle and various varieties and grade of the commodity found in India and commodity fundamentals, among others.

Besides, SEBI has provided trading related parameters for performance review of commodity. The framework has been laid down by SEBI in consultation with the Commodity Derivatives Advisory Committee.

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"In order to ensure that the derivatives contracts are closely aligned to the physical markets, it is imperative to have a framework to evaluate the performance of these contracts based not merely on statistics regarding delivery and trade volumes but also on the strength of a comprehensive empirical assessment after considering all relevant information, pertaining to the performance of a derivative contract during the relevant period of time," SEBI noted.

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