Description

ICCL reviews margin requirements for commodity derivatives with updated minimum initial margin, SOMM, MPOR and VSR parameters effective October 1, 2025.

Summary

ICCL has reviewed the margin framework for commodity derivatives segment based on SEBI guidelines, updating minimum Initial Margin (IM), Short Option Minimum Margin (SOMM), Margin Period of Risk (MPOR) and Volatility Scan Range (VSR) parameters for various commodities. The changes take effect from October 1, 2025.

Key Points

  • Updated margin parameters for Brent Crude, WTI Crude, Gold and Silver based on volatility categorization
  • Non-agricultural commodities classified as high volatility (crude oils, silver) or low volatility (gold)
  • Special provisions for crude oil contracts with 33% margins as per lead exchange measures
  • Option contract margins subject to minimum 2-day MPOR or futures MPOR, whichever is higher
  • All existing additional margins continue to apply

Regulatory Changes

Updated Margin Requirements:

  • Brent Crude & WTI Crude: 10% minimum IM, 10% SOMM, 3-day MPOR, 6% VSR (but effectively 33% for all parameters per lead exchange)
  • Gold: 6% minimum IM, 6% SOMM, 2-day MPOR, 4% VSR
  • Silver: 10% minimum IM, 10% SOMM, 3-day MPOR, 6% VSR

Key Provisions:

  • Minimum IM shall not be scaled up by MPOR
  • Option seller margins shall be higher of SOMM or VaR scaled by MPOR
  • All other existing margins remain applicable

Compliance Requirements

  • All members and participants must implement updated margin parameters
  • Ensure compliance with minimum margin requirements for respective commodities
  • Apply appropriate MPOR calculations for option contracts
  • Maintain all existing additional margin categories

Important Dates

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

Impact Assessment

Market Impact: High impact on commodity derivatives trading with revised margin requirements potentially affecting trading volumes and participant strategies. Crude oil contracts face significantly higher margins (33%) which may reduce speculative activity. Gold benefits from lower margin requirements as a low-volatility commodity.

Operational Impact: Trading members need to update risk management systems and ensure adequate margin funding. Position limits and trading strategies may require adjustment based on new margin structures.

Impact Justification

Significant changes to margin requirements for commodity derivatives affecting all market participants