Amid sharp decline in turnover of the commodity exchanges, regulator FMC has come out with a revised policy to allow traders to take higher position in commodities traded on the exchanges in order to improve depth and liquidity in the market.
To promote transparency and prevent price manipulation in the market, the Forward Markets Commission (FMC) has also directed bourses to disclose open position limits of top 10 trading clients including hedgers on their website.
The revised norms put out on October 20 have come into effect immediately. 'Open position limit' refers to highest number of futures contract that an investor is allowed to hold on one underlying commodity.
According to the latest circular, FMC has come out with a new formula, based on which the gross position limit in agricultural commodities are capped for all exchanges at 50 per cent of the estimated production and imports.
For brokers, the position limit has been doubled and will be 10 times of the client's level position limit or 20 per cent of the market wide open interest, whichever is higher.
For clients, the position limit will be based on the numerical position limits as decided from time to time or five per cent of the market wide open interest, whichever is higher. For the present, the numerical position limits as existing shall be continued, FMC said.
For considering position limit, an client's position will be taken in net (of the total) and that of a broker in gross.