Margin Framework for Commodity Derivatives Segment | Motial Oswal
Margin Framework for Commodity Derivatives Segment | Motial Oswal

Margin Framework for Commodity Derivatives Segment

The MCXCCL issued a circular (MCXCCL/RISK/225/2020) dated September 22, 2020 notifying members that the Additional Risk Management measures for crude oil contracts put in place as per the MCXCCL circular (MCXCCL/RISK/094/2020) dated April 28, 2020 shall remain in force till further notification from MCXCCL.

Here are the Additional Risk Management measures that the referenced circular dated April 28, 2020 put forth due to increased volatility in Crude Oil contracts.

Initial margins:

An initial margin of 100% was to be levied for all existing and yet to be launched Crude Oil contracts. The minimum initial margin to be levied was Rs. 95,000 per lot.

Additional margins:

1. An additional margin of Rs. 1,00,000 per lot was to be levied on near month Crude Oil Futures and on short side of near month for Crude Oil Options.

2. Further, an additional margin of Rs. 50,000 per lot was also to be levied on all other Crude Oil Futures and on the short side of Crude Oil Options, including yet to be launched Crude Oil contracts.

3. Additionally, based on the movement of the Settlement Price (SP), additional margins over and above the ones mentioned previously were to be levied, as follows.

    - If the price of the crude oil falls between 50% to 75%, an additional margin of 50% of the MTM would be levied.

    - If the price of the crude oil falls between 75% to 90%, an additional margin of 100% of the MTM would be levied.

    - If the price of the crude oil falls beyond 90%, an additional margin of 125% of the MTM would be levied.

Spread margin benefit:

The spread margin benefit on initial margins were not to be provided in Crude Oil contracts.

Options VSR:

The Volatility Scan Range (VSR) was to be increased from 5% to 20% for all existing and yet to be launched Crude Oil Options contracts.

Extreme Loss Margin (ELM):

An ELM of 1.25% was to be continued to be levied on all Crude Oil Futures contracts and on short positions of all Options Contracts.

 

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