NCDEX to scan client trades

The National Commodity and Derivatives Exchange Thursday said it has decided to move to the second level of oversight, from oversight of its members to oversight of their clients. This has become necessary because of the growth in volumes traded on the exchange, it said in a circular.

"The exchange has been proactively adopting the global best practices in all areas of its functioning, specifically in areas of risk management, surveillance, and market oversight," it said.

"Real time volatility margins, gross margins at client levels, robust 'Know Your Customer' processes for member enrolment have all been a part of this approach," the circular added.

With the growth in volumes traded on the exchange and in view of the large number of transactions taking place, as also their continued growth, the exchange intends to gradually move to second level (client level) oversight from membership level oversight at present, it said.

"Such oversight will tighten risk management processes, aggregate the positions of clients participating through more than one member for better regulation and will be in the larger interests of all trading participants," it said.

To this purpose, NCDEX has decided that every participant on its trading platform should have a unique identity number. It has directed the members to collect certain information from their clients and maintain them.

For individual clients, members must collect the permanent account number allotted by the income tax department. If such a number is not available, the client shall be required to give a declaration to that effect.

In such an event, members must collect details of passport, driving licence or voter identity number of the client. If the client happens to be a partnership company or a limited company, members must collect the unique registration number issued by the relevant regulatory authority.

With immediate effect, all members are required to allot and maintain the client ID number, along with other details, according to the circular.