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.
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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.
- The monetary penalty as stated above, will be credited to the Investor Protection Fund of the Exchange.
Members failing to fulfil their funds obligations (including CTT obligation) by the scheduled date and time to Clearing Corporation shall be subjected to the following penalty structure.
| Sl No. |
Type of Non-fulfilment |
Penalty Charge % per day |
Action |
| 1 |
Value Rs. 5 lakhs or more |
0.07 |
The trading facility of the member shall be withdrawn immediately & commodities pay out shall be withheld.
|
| 2 |
Value less than Rs. 5 lakhs |
0.07 |
If in the last three months, the member is short over Rs. 2 lakhs on six or more than six occasions, the trading facility of the member shall be withdrawn and commodities pay out shall be withheld*.
|
*In case, the member is disabled on account of (b) above, on making good the shortage amount, the member shall be permitted to trade subject to its providing a deposit equivalent to its cumulative funds shortage as the 'funds shortage collateral'. Such deposit shall be kept with the Clearing Corporation for a period of ten settlements and shall be released only if no further funds shortages are reported for the member in next ten consecutive settlements.
Members may further note that there shall not be any margin benefit or any interest payment on the amount so deposited as 'funds shortage collateral'. The amount may be provided by way of cash, fixed deposit receipts, or bank guarantee, equivalent to the cumulative funds shortage.
*Recovery of Funds due through liquidation of Commodities Withheld:-
The funds defaulting member will be allowed such time as may be permitted by NCL depending upon the facts of the case to bring in the amount in default. If funds are not brought at any time by the defaulting member, the Clearing Corporation at its discretion will proceed to close out commodities in the normal / auction market. If the member does not bring in the amount by the time permitted by NCL, and continues to default thereafter, NCL 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 IPF 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.