Description

ICCL updates margin parameters for commodity derivatives including initial margin, SOMM, MPOR and VSR for various commodities 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 various commodities categorized by volatility levels.

Key Points

  • Updated margin parameters for Brent Crude, WTI Crude, Gold, and Silver
  • Commodities categorized into High and Low volatility groups
  • Special higher margins for Brent Crude and WTI Crude (33% each for IM, SOMM, and VSR)
  • Different MPOR requirements for futures vs options contracts
  • All existing additional margins continue to apply

Regulatory Changes

Margin Parameters by Commodity:

  • Brent Crude & WTI Crude (High Volatility): 10% IM, 10% SOMM, 3-day MPOR, 6% VSR (Lead exchange: 33% each)
  • Silver (High Volatility): 10% IM, 10% SOMM, 3-day MPOR, 6% VSR
  • Gold (Low Volatility): 6% IM, 6% SOMM, 2-day MPOR, 4% VSR

Key Rules:

  • Minimum IM not scaled up by MPOR
  • Options MPOR minimum 2 days or futures MPOR, whichever is higher
  • Option seller margins: higher of SOMM or VaR scaled by MPOR

Compliance Requirements

  • All members and participants must implement new margin framework
  • Risk management systems must be updated to reflect new parameters
  • Existing additional margins (Extreme Loss, Crystallized Loss, Tender Period, Delivery Period, Concentration, Additional Lean Period, Special) continue
  • Compliance with categorization based on SEBI circulars SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 and SEBI/HO/CDMRD/DRMP/CIR/P/2021/08

Important Dates

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

Impact Assessment

The updated margin framework will affect trading costs for commodity derivatives participants. Higher margins for high-volatility commodities like crude oil and silver may reduce leverage and require additional capital allocation. The special 33% margins for crude oil contracts significantly increase capital requirements for these positions. Gold traders benefit from lower margin requirements due to its low volatility classification.

Impact Justification

Updates to margin parameters for commodity derivatives affect trading costs and risk management for participants