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Commodity market regulator Forward Markets Commission (FMC) has fixed a new minimum capital requirement for members to trade on exchanges. Members have to deposit the amount with the exchange and will not get any trading exposure based on the fund.
The regulator has observed that the commodity exchanges give members exposure on their entire security deposit. As a result, when a member defaults, there is practically no deposit with the exchange which can be used for settlement of claims of the clients and payment of arbitration fee by the members, FMC said, in a statement.
Therefore, the Commission, after consulting with the national commodity exchanges, has prescribed a different base minimum capital requirement for trading in exchanges, it said.
Multi Commodity Exchange and National Commodity and Derivatives Exchange have to collect Rs 10 lakh from each member, while it will be Rs 50 lakh for members using algo trading (software-driven trades).
For members of the National Multi Commodity Exchange, Indian Commodity Exchange, ACE Derivatives and Commodity and Universal Commodity Exchange, the minimum capital requirement will be Rs 5 lakh and with algo trading it will be Rs 25 lakh.
“While 25 per cent of the capital should be in cash, the balance can be in the form of cash equivalents such as fixed deposit and bank guarantee. No exposure will be given by the exchange on this base minimum capital,” said FMC.
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