MANU/SDER/0012/2016

Ministry : Securities and Exchange Board of India

Department/Board : Commodity Derivatives Market Regulation Department

Circular No. : SEBI/HO/CDMRD/DMP/CIR/P/2016/71

Date : 19.08.2016

To,

The Managing Directors / Chief Executive Officers
National Commodity Derivatives Exchanges

Dear Sir / Madam,

Position Limits for Hedgers.

1. As per Section 131(4) of Finance Act, 2015 all rules, directions, guidelines, instructions, circulars, or any like instruments, made by the erstwhile FMC or the Central Government applicable to recognized associations under the FCRA would continue to remain in force for a period of one year from the date on which FCRA was repealed (September 29, 2015), or till such time as notified by SEBI, whichever is earlier.

2. Erstwhile FMC, from time to time, had prescribed various norms related to Position Limit for hedgers. This circular is being issued to consolidate and update such norms prescribed by erstwhile FMC.

3. 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 exchanges shall hence forth stipulate a Hedge Policy for granting hedge limits to their members and clients. The Exchanges shall widely publicize their respective hedge policy by holding awareness programmes for the target participants and making it publicly available on their website.

4. In this regard, the Exchanges shall adhere to the following broad guidelines while granting hedge limit Exemptions to their members and clients:

a) The hedge limit to be granted by the Exchanges to the bona fide hedgers shall be in addition to the normal position limit allowed to it. Such hedge limit is non-transferrable and shall be utilized only by the Hedger to whom the limit has been granted and not by anyone else

b) This hedge limit granted for a commodity derivative shall not be available for the near month contracts of the said commodity from the date of applicability of near month limit.