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SEBI reclassifies commodities, revises limits for derivatives

The Securities and Exchange Board of India (SEBI) has created three categories for agricultural commodities and has prescribed position limits that investors can hold for each category of commodities, in a bid to reduce price volatility.

SEBI has classified commodities as Sensitive, Broad and Narrow, based on the frequency of government interventions and other extraneous factors affecting markets and the overall availability.

”In any given year, based on the average of production data and import data of past five years on a rolling basis and keeping in view of various extraneous factors that affect trading in derivatives, the agricultural commodities shall be classified  into  three categories, viz, Sensitive, Broad and Narrow,” the regulator said.

The overall client level position limit for sensitive commodities will be 0.25% of deliverable supply, while it will be 0.5% for narrow commodities and 1% for broad commodities, SEBI said.

SEBI has asked all the national commodity derivatives exchanges to jointly classify agricultural commodities on an annual basis as per the prescribed criteria.

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