The financial capacity of members could soon determine the open position limits for trading in various agri- and non-agri commodities on futures exchanges, if the Forward Markets Commission (FMC), the commodity derivatives market regulator, has its way.
In a notice on its website, FMC said it proposed to review limits according to the financial soundness and capacity of members as reflected in their net worth, the number of CTCL (computer-to-computer-link terminals), number of clients, etc. It said uniform position limits for all members of exchanges irrespective of the above factors is not in the interest of market regulation or development.
FMC will accept comments from commodity-linked entities as well as individuals till June 15. Currently, open position limit for all members stands uniform, irrespective of their client size, financial soundness and handling capacity.
More From This Section
The open position limits are fixed separately for clients and members as a measure of maintaining market integrity and to prevent cartelisation.
These open position limits are determined on the basis of production level / availability of a commodity in a year.
These limits are also reviewed from time-to-time, considering the physical market size of the commodities, past performance of contracts, and volatility in the prices.