Penalties
Short / non-reporting of client margin
The following penalty shall be levied on the members for short / non-collection of margins from their clients beyond T + 2 working days in case of short reporting by trading/clearing member as per the details given below per instance.
| Short collection for each client | Penalty percentage |
|---|---|
| (< Rs 1 lakh) And (< 10% of applicable margin) | 0.5% |
| (= Rs 1 lakh) Or (= 10% of applicable margin) | 1.0% |
Where a = short-collection / non-collection of margins per client per day
In case of short-collection /non collection of initial margins, the above penalty structure would be applicable from T day.
- The members are supposed to report the collection of all margins from their clients at the end of each trading day and to report short collection/non-collection of all margins on the T+5 day.
- All instances of non-reporting shall amount to 100% non-collection of margin and the penalty as prescribed above shall be charged on these instances in respect of non-collection. The penalty shall be collected by the Exchanges not later than five days of the last working day of the trading month.
- With respect to repeated defaulters, who default 3 times or more during a month, the penalty would be 5% of the shortfall in such instances.(Every short/non collection of margin is to be considered as one instance of default. In case margin shortage is reported for a client 3 times or more during a month, i.e., either in consecutive instances or in 3 different instances, the penalty would be 5% of the shortfall from 4th instance of shortfall. E.g. shortage is reported for a client on 1st and 2nd day of month consecutively; thereafter again on 10th day shortage is reported. So the number of instances is 3 and in case shortage is reported on any day later in the month, the penalty shall be 5% of the shortfall amount for all such instances beyond 3rd instance.)
The following penal provisions are made to discourage/ prevent open interest violations at Commodity level / near month contract level. Monetary penalty on the concerned member for violations in the open interest (either on own account or on account of clients) are linked to the quantum/ value of violation committed and to be charged from the concerned member for each such violation as under:
- Where the violation is more than 2% of the prescribed limit(s) - Limit exceeded x Closing price x number of days such violation continued x 2% (0.02) or Rs. 10,000/- whichever is higher.
- Where the violation is up to 2% of the prescribed limit(s) - Limit exceeded x Closing price x number of days such violation continued x 2% (0.02) or Rs. 10,000/- whichever is lower.
- The member has to ensure reduction in position and to bring it within the prescribed limit(s) by the next trading day after the day of violation. In case such violation continues, the Exchange would square-off the excess position without any further notice to the member by putting the orders on behalf of the member in that client code and will not be responsible for the consequences of such action
- In case, the instance at (1) above is observed for more than 3 times in a month across the market, the Exchange would suspend the concerned member for a period of one week. For instances at (2) above, the Exchange may devise its norms to deal with habitual defaulters.
- Further, in case repeated violations of such nature are observed by SEBI, SEBI may consider action against the concerned Exchange.
Non-fulfilment of settlement obligation towards settlement of Commodity Derivatives contracts by the scheduled date and time shall be treated as a violation.
In case of a settlement shortage of Rs.5 lakhs or more the Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.
In case of settlement shortage of less than Rs.5lakhs the amount of shortage shall be blocked from the effective deposits of the clearing member to the extent of funds shortage. This may lead to the withdrawal of the trading facility of the clearing member and the associated trading member.
Further, if the clearing member is short for an amount of Rs.2 lakhs or more in six or more occasions in the preceding three months, the Clearing Corporation may advise the Exchange to withdraw any or all of the membership rights of the clearing member including the withdrawal of trading facilities of all trading members and/ or clearing facility of custodial participants clearing through such clearing members.
In case of any over-night settlement shortages a penal charges of 0.07% per day of shortage shall be levied.
The funds defaulting member will be allowed such time as may be permitted by the relevant authority depending upon the facts of the case to bring in the amount in default. If the member does not bring in the amount by the time permitted by the relevant authority, and continues to default thereafter, the relevant authority would be constrained to initiate suitable action including withdrawal of his trading facility, appropriation of his capital / deposits with the Exchange / Clearing Corporation and/or declare him a defaulter.
- Buyer default shall not be permitted.
- Penalty on seller in case of delivery default (default in delivery against open position at expiry in case of compulsory delivery contracts, default in delivery after giving intention for delivery) shall be as follows:
- 3% of Settlement Price + replacement cost (difference between settlement price and higher of the last spot prices on the commodity pay-out date and the following day, if the spot price so arrived is higher than Settlement Price, else this component will be zero.)
- Exchanges shall have the flexibility to increase/decrease penalty for specific commodities depending on situation, in consultation with SEBI.
- Exchange shall have appropriate deterrent mechanism (including penal/disciplinary action) in place against intentional/wilful delivery default.
* Norms for apportionment of penalty on Delivery Shortage:-
At least 1.75% of Settlement Price shall be deposited in the CSGF of the exchange.
Up to 0.25% of Settlement Price may be retained by the Exchange towards administration expenses. 1% of Settlement Price + replacement cost shall go to buyer who was entitled to receive delivery.