The Securities and Exchange Board of India has revised client position limits and penalties for breaches in the commodity derivatives segment with immediate effect. The changes update the classification and position limit framework for agricultural commodities and cap daily monetary penalties imposed on members for client level open interest violations. For breaches exceeding 2% of the prescribed limit, the penalty is calculated as the excess position multiplied by the closing price, the number of violation days and 2%, capped at INR 200,000. For breaches of up to 2%, the same calculation applies with a cap of INR 10,000. Members must bring positions within limits by the next trading day or face an exchange initiated square-off. Repeated breaches can result in a one-day square-off restriction and an additional penalty equal to the original penalty, although the latter does not apply where the breach arises exclusively from clubbing positions. An agricultural commodity now qualifies as a broad commodity if it is not sensitive and its average deliverable supply over the past five years is at least 1 million metric tons or INR 5,000 crore. Overall client position limits are set at 2% of deliverable supply for broad commodities, 1% for narrow commodities and 0.5% for sensitive commodities. Commodities moving from the narrow to broad category must retain the 1% limit for one year, after which an exchange may raise it to 2% following a review.

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