The Indian markets regulator has proposed extending early pay-in benefits to commodity options contracts, a framework currently applicable only to futures contracts. The existing early pay-in framework for futures contracts permits traders to deposit certified goods to the stock exchange-accredited warehouse against the contracts sold.
For such short positions against which early pay-in has been made, clearing corporations will exempt all standard margins, except mark-to-market margins, as per the Securities and Exchange Board of India’s (Sebi) consultation paper released on Tuesday.
If implemented, this will help traders avoid heavy margin requirements and potential short-delivery penalties by blocking the underlying commodity early. Public comments on the matter are to be submitted by May 26.
The proposal follows a working group’s review of the current regulatory framework of delivery and settlement applicable to the agricultural commodity derivatives segment. In late February, the Commodity Derivatives Advisory Committee had broadly agreed to the working group’s recommendations on the matter.