Description

ICCL updates margin parameters for commodity derivatives including initial margin, SOMM, MPOR and VSR effective October 1, 2025.

Summary

ICCL has reviewed and updated the margin framework for commodity derivatives segment based on SEBI guidelines. The circular specifies new minimum Initial Margin (IM), Short Option Minimum Margin (SOMM), Margin Period of Risk (MPOR), and Volatility Scan Range (VSR) parameters for different commodities effective October 1, 2025.

Key Points

  • Updated margin parameters for Brent Crude, WTI Crude, Gold, and Silver
  • Commodities categorized by volatility (High/Low) and type (Non-Agri)
  • Special enhanced margins for crude oil contracts (33% IM, SOMM, and VSR)
  • Minimum MPOR requirements specified for each commodity
  • Option contracts subject to minimum 2-day MPOR or futures MPOR, whichever is higher

Regulatory Changes

Margin Parameters by Commodity:

  • Brent Crude & WTI Crude: 10% minimum IM/SOMM, 3-day MPOR, 6% VSR (enhanced to 33% each as per lead exchange)
  • Gold: 6% minimum IM/SOMM, 2-day MPOR, 4% VSR (Low volatility category)
  • Silver: 10% minimum IM/SOMM, 3-day MPOR, 6% VSR (High volatility category)

Key Rules:

  • Minimum IM not scaled up by MPOR
  • Option seller margins = higher of SOMM or VaR scaled by MPOR
  • All existing margins (ELM, CLM, TPM, DPM, etc.) continue to apply

Compliance Requirements

  • All members and participants must implement updated margin framework
  • Risk management systems must accommodate new parameters
  • Compliance with categorization based on commodity volatility and type
  • Adherence to minimum margin requirements without scaling exceptions

Important Dates

  • Effective Date: October 1, 2025 (beginning of day)
  • Notice Date: September 9, 2025

Impact Assessment

Trading Impact: Updated margin requirements will affect position costs and risk calculations for commodity derivatives traders. Enhanced margins for crude oil contracts (33%) significantly increase capital requirements compared to standard rates.

Risk Management: Improved risk framework with volatility-based categorization provides better risk coverage. Minimum MPOR requirements enhance protection during volatile periods.

Market Operations: Members need to update systems and processes to accommodate new margin calculations and ensure compliance by October 1, 2025.

Impact Justification

Updates to margin framework for commodity derivatives affect trading costs and risk management but limited to specific commodity segments