Description

ICCL updates minimum margin requirements and risk parameters for commodity derivatives including crude oil, gold, and silver contracts effective October 1, 2025.

Summary

ICCL has reviewed and updated the margin framework for commodity derivatives segment based on SEBI guidelines. The circular establishes new minimum Initial Margin percentages, Short Option Minimum Margin rates, Margin Period of Risk (MPOR), and Volatility Scan Range (VSR) for various commodities categorized by volatility levels. Changes become effective October 1, 2025.

Key Points

  • Commodities categorized into High and Low volatility groups with different margin requirements
  • Gold classified as Low volatility (6% IM, 2-day MPOR, 4% VSR)
  • Silver, Brent Crude, and WTI Crude classified as High volatility (10% IM, 3-day MPOR, 6% VSR)
  • Special enhanced margins for crude oil contracts: 33% minimum IM, SOMM, and VSR
  • Option contract MPOR must be minimum 2 days or futures MPOR, whichever is higher
  • Option seller margins will be higher of SOMM or VaR scaled by MPOR

Regulatory Changes

  • Updated volatility categorization framework for commodities
  • Revised minimum Initial Margin percentages based on commodity type and volatility
  • Modified Margin Period of Risk requirements
  • Enhanced risk parameters specifically for crude oil contracts
  • Standardized Short Option Minimum Margin framework

Compliance Requirements

  • All members and participants must implement new margin requirements from October 1, 2025
  • Risk management systems must accommodate updated MPOR and VSR parameters
  • Option trading systems must apply higher of SOMM or scaled VaR margins for sellers
  • Existing additional margins (Extreme Loss, Crystallized Loss, Tender Period, Delivery Period, Concentration, Additional Lean Period, and Special Margins) continue to apply

Important Dates

  • October 1, 2025: New margin framework becomes effective from beginning of day
  • September 9, 2025: Circular issued date

Impact Assessment

  • Increased capital requirements for high volatility commodity trading
  • Enhanced risk management for crude oil derivatives with 33% minimum margins
  • Potential reduction in leverage for commodity derivatives positions
  • Improved market stability through better risk calibration
  • Members may need system updates to accommodate new margin calculations

Impact Justification

Significant changes to margin framework affecting all commodity derivatives trading with substantial impact on risk management and capital requirements