Securities and Exchange Board of India has issued a circular dated July 08, 2021[1], to all recognized Stock Exchanges Having Commodity derivates Segment and The Managing Directors / Chief Executive Officers, about Review of Advance Intimation timelines for modifications in the contract specifications of commodity derivatives contracts. 

It has been stated in

the circular that the Securities and Exchange Board of India has specified the procedure of carrying out modifications in the contract specifications of commodity derivatives contracts in a circular dated November 14th, 2019[2]. The contract modifications are categorized into category A, category B, and category C Which is based on their materiality. The permission to modify contract specification is subject to the conditions that before the introduction of any modification, The stock exchanges need to inform the security and exchange board of India and market participants as per the circular dated November 14th, 2019, the reasons for the modification needs to be provided as well. The circular has mentioned the advanced imitation timelines, which are 10 days for category A and thirty days for category B and category C contract modifications.

Category A includes non-material modifications. these modifications can be made at exchange level running contract and are yet to be launched.

Category B includes Material modifications. These modifications can be made at the exchange level are yet to be launched contracts or running contracts that have nil open interest.  Approval of the Regulatory Oversight Committee and Product Advisory Committee shall be required post facto to make these modifications.

Category C includes Material modifications. these modifications can be made only after approval from SEBI. Deliberation and approval of the Regulatory Oversight Committee and Product Advisory Committee shall be required to make modifications before seeking permission from SEBI. It has been stated in the circular dated July 08. 2021 that the number of days of advance intimation for all three categories that are category A, category B, and Category C has been reduced to 10 days. This was decided in consultation with the stock exchanges to bring in uniformity and give effect to the contract notifications show that the modified contract represents a healthy replica of the physical market and has the desired impact. 

It has been stated in the circular dated July 8th, 2021 that the provisions of this circular shall be effective from the date of this circular, and the other provisions of the circular dated November 14th, 2019 shall continue to remain the same.

Section 11(1) of Securities and Exchange Board of India Act, 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 confers power to issue a circular to protect the interests of investors in securities, promote development, and regulate the securities market.

 [1] SEBI/HO/CDMRD_DOP/P/CIR/2021/592

[2] SEBI/HO/CDMRD/DOP/CIR/P/2019/135

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