The National Commodity and Derivatives Exchange (NCDEX) today issued a financial conduct framework which is expected to contribute directly in making the futures market transparent and less vulnerable to manipulation.
The exchange guidelines clarify the definition of "persons acting in concert" and the rules for clubbing of open positions. These guidelines will help prevent circumvention of the stipulated position limit norms by clients/members, the exchange said in a statement.
Further to several enhancement measures to strengthen risk management and surveillance framework, these guidelines are also designed to curb 'benami' account trading in commodity futures markets, it added.
The exchange monitoring and surveillance system will take note of attempts which may appear to compromise market integrity and any violation will attract stringent penal action, as outlined by the regulator, will be taken on violation of position limits, it added.
The new set of principles is a defining initiative for the financial market and is backed by extensive research and consultations with market regulator Sebi, it said.
"India is in the midst of a structural transformation to clean up the economy and remove the scourge of black money and benami transactions. We are pleased to be able to deliver a set of guidelines that reinforces our commitment to ensure orderly functioning of the markets now and in the future and support the underpinning of the exchange to farmers and hedgers, NCDEX managing director and CEO Samir Shah said.
The new guidelines will help futures market participants to have a clear understanding of what constitutes 'acting in concert'. Through a series of well-regarded initiatives and its world-class risk management and surveillance system, NCDEX remains committed to protecting investor interest, Shah said.
The transparent framework will help members to establish internal processes to ensure strict monitoring of client position limits and enhance the exchange's ability to comply with obligations under PMLA (Prevention of Money Laundering Act).
The exchange believes that these measures, combined with its ongoing commitment to the physical market and to new services delivered in collaboration with its market partners, will ensure the exchange continues to grow and thrive as the preferred platform for trading in agricultural futures, it said.
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