The new framework will be effective from August 1, Securities and Exchange Board of India said.

The index futures will be cash settled, unlike its individual constituents which have to be settled by delivery.

Currently, the rule of bringing in the entire upfront margins is only applicable to traders in derivatives. Upfront margins consist of value at risk (VaR) margin and extreme loss margin (ELM). They are calculated by the exchanges on the basis of volatility…

Sebi noted that in recent times extreme volatility has been observed in commodity prices globally, particularly in the case of crude oil, wherein the prices had unprecedentedly gone down to zero and subsequently even negative.

The move comes after the regulator received representation to review the requirement of including all the price movements during the last 15 years, in the historical scenarios prescribed for stress testing.

The regulator, in 2014, permitted stock exchanges to introduce liquidity enhancement schemes in equity cash and equity derivatives segments to enhance liquidity in illiquid securities.

Experts point out that the new rules have largely impacted the trading volumes in the commodity segment due to its high contract value and leading to huge margins requirements for traders.

Sebi had last year introduced the peak margin regulations with an aim to decrease speculative trading and curb the leverage brokers offer to their clients.

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