Question : Markets regulator Sebi in March 2021 came out with a new penal structure for _ in the event of delivery default. What is the appropriate option for the blank space ?
(a) Commodity derivatives segment
(b) Cash segment
(c) Both (a) & (b)
(d) None of the above
Ans. (a)
- Markets regulator Sebi in March 2021 came out with a new penal structure for commodity derivatives segment in the event of delivery default.
- Clearing corporation, having commodity derivatives segment, should have an appropriate deterrent mechanism in place against intentional or wilful delivery default and ensure adequate compensation to the non-defaulting counterparty.
- The regulator said it received representations from market participants in the commodity derivatives segment for standardisation of delivery default norms, among others.
- Consequently, Securities and Exchange Board of India (Sebi) in consultation with clearing corporations came out with delivery default norms, which will be effective from the first trading day of May 2021.
- In agricultural and non agricultural commodities, Sebi said the penalty for delivery default by seller will now be 4 per cent and 3 per cent of the settlement price plus replacement cost, respectively.
- The provisions for levy of penalty on delivery default by the buyer will be put in place by the clearing corporations.
- With regard to futures contracts on agri-commodities, Sebi said penalty on seller in case of delivery default would be 4 per cent of settlement price along with replacement cost (difference between settlement price and average of three highest of the last spot prices of 5 succeeding days after the commodity pay-out date, if the average price so determined is higher than settlement price, else this component will be zero).
- In case of futures contracts on non-agri commodities, the penalty would be 3 per cent of settlement price along with replacement cost.
- In respect of norms for apportionment of penalty, Sebi said at least 1.75 per cent of settlement price will be deposited in the Settlement Guarantee Fund (SGF) of the clearing corporation, while up to 0.25 per cent of settlement price may be retained by such corporation towards administration expenses.
- It further said 1 per cent of settlement price in case of non-agri goods or 2 per cent of settlement price in case of agri goods plus replacement cost will go to a buyer who was entitled to receive the delivery.