Markets regulator Sebi today made Unique Client Code (UCC) and Permanent Account Number (PAN) mandatory for all the persons transacting on commodity exchanges.
“It shall be mandatory for the members of the commodity derivatives exchanges to use UCC for all clients transacting on the commodity derivatives exchanges,” Securities and Exchange Board of India (Sebi) said in a circular.
It said PAN would be sole identification number and mandatory for all entities/persons who are desirous of transacting on the exchanges.
However, investors residing in Sikkim are exempted from the mandatory requirement of PAN. The exchanges should, however, ensure a system of proper verification to verify that such investors are residents of Sikkim.
The exchanges would have to ensure that the members upload details of PAN so collected to the exchanges as part of UCC and verify the documents.
Member would also be required to furnish the documents of their clients to the commodity exchanges and the same would be updated on a monthly basis. Such information for a specific month should reach the exchange within seven working days of the following month.
The exchanges would impose penalty on the member at the rate of 1 per cent of the value of every trade that has been carried out by the member without uploading the UCC details of the clients.
The penalty collected by the exchanges would be transferred to the Investor protection Fund (IPF). Further, if the client details are not uploaded within a month of the trade, the member is liable to be suspended.
The exchanges would be required to maintain a database of client details submitted by members. Historical records of all such submissions would be maintained for a period of seven years by the exchanges.
In a separate circular, Sebi has asked commodity exchanges to make fresh contribution towards settlement guarantee fund (SGF) in case of any shortfall.
This contribution requirement by exchange in any year is currently capped at 5 per cent of the gross revenue (net of income Tax).
Now, the cap has been removed and exchanges will have to be required to meet the shortfall in full as indicated in quarterly assessments. Currently, bourses make assessment on SGF on quarterly basis.
To determine adequacy of SGF, changes would have to conduct a stress test, which identify top two members with the maximum risk to the exchange on each of these dates.
For the stress test, Sebi said that highest pay-in date and highest open interest date for each quarter are considered for the test.
Sum total of the risk of top two members is then compared with the exchange SGF to determine its adequacy.