Description

ICCL revises minimum initial margin and short option minimum margin requirements for all variants of Gold and Silver commodity derivative contracts, effective October 14, 2025.

Summary

The Indian Clearing Corporation Limited (ICCL) has issued a circular revising the Minimum Initial Margin (IM) and Short Option Minimum Margin (SOMM) for all variants of Gold and Silver commodity derivative contracts. This circular modifies previous circulars dated August 2, 2025 and September 9, 2025. The changes introduce higher margin requirements and updated risk parameters including Margin Period of Risk (MPOR) and Value at Risk Scaling (VSR) percentages.

Key Points

  • Gold contracts: Minimum Initial Margin increased to 7%, SOMM set at 7%
  • Silver contracts: Minimum Initial Margin increased to 11.50%, SOMM set at 11.50%
  • Gold contracts: MPOR of 2 days and VSR of 4% applicable
  • Silver contracts: MPOR of 3 days and VSR of 6% applicable
  • Initial margin will be the higher of minimum initial margin or VaR scaled up by MPOR
  • Changes supersede ICCL Circular No 20250802-1 and ICCL Circular No 20250909-5

Regulatory Changes

Revised Margin Parameters

Gold (all variants):

  • Minimum Initial Margin: 7%
  • Short Option Minimum Margin: 7%
  • Applicable MPOR: 2 days
  • Applicable VSR: 4%

Silver (all variants):

  • Minimum Initial Margin: 11.50%
  • Short Option Minimum Margin: 11.50%
  • Applicable MPOR: 3 days
  • Applicable VSR: 6%

Margin Calculation Methodology

The initial margin for these contracts shall be calculated as the higher of:

  1. The minimum initial margin (as specified above), or
  2. The Value at Risk (VaR) scaled up by the Margin Period of Risk (MPOR)

Compliance Requirements

  • All members and participants trading Gold and Silver commodity derivative contracts must ensure adequate margin coverage as per the revised parameters
  • Members need to adjust their risk management systems and capital allocation to accommodate the higher margin requirements
  • Participants should update their internal margin calculation systems to reflect the new minimum margins and risk parameters
  • Members must ensure compliance from the beginning of trading day on October 14, 2025

Important Dates

  • Circular Issue Date: October 13, 2025
  • Effective Date: October 14, 2025 (Begin of Day)
  • Modified Circulars: ICCL Circular No 20250802-1 (August 2, 2025) and ICCL Circular No 20250909-5 (September 9, 2025)

Impact Assessment

Capital Impact

The revised margin requirements represent a significant increase in capital requirements for market participants trading Gold and Silver commodity derivatives. Members will need to maintain higher margin deposits, which may impact their available trading capital and position limits.

Risk Management

The introduction of specific MPOR and VSR parameters indicates a more conservative risk management approach by ICCL, aimed at ensuring adequate coverage during periods of market volatility. The higher margins for Silver (11.50%) compared to Gold (7%) reflect the historically higher volatility in Silver markets.

Operational Impact

Members and participants have only one business day to prepare for these changes, requiring immediate action to ensure adequate margin funding and system updates. The short implementation timeline may require accelerated operational adjustments.

Market Liquidity

Higher margin requirements may temporarily impact liquidity in Gold and Silver derivative markets as some participants may reduce position sizes to manage increased capital requirements.

Impact Justification

Significant increase in margin requirements for gold and silver contracts will directly impact capital requirements for all members trading these commodity derivatives, effective next trading day.