Circular No. HO/47/16/13(4)2026-MRD-POD1/I/14266/2026 dated June 19, 2026
The Securities and Exchange Board of India (SEBI) has issued a circular revising the regulatory framework governing the Early Pay-in Facility applicable to the Commodity Derivatives Segment. The amendment clarifies the extent of margin benefits available to market participants who undertake early pay-in of certified goods.
Background
Para 11.3 of Chapter 11 of the SEBI Master Circular for Commodity Derivatives Segment (SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136, dated August 04, 2023) prescribes the existing norms governing the Early Pay-in Facility in respect of commodity derivatives contracts.
Pursuant to representations received from stakeholders and detailed deliberations by the Working Group (WG) constituted on the "Review of current regulatory framework of delivery and settlement applicable to Agricultural Commodity Derivatives Segment," along with inputs from the Commodity Derivatives Advisory Committee (CDAC), SEBI has now revised Para 11.3.1 of the Master Circular.
The Revised Provision
Para 11.3.1 of the Master Circular now reads as follows:
"Clearing Corporations shall provide early pay-in facility to market participants permitting them to deposit certified goods to the Clearing Corporation accredited warehouse against relevant derivatives contracts. For such positions against which early pay-in has been made, based on risk perception, Clearing Corporations may exempt imposition of all types of margins. However, Clearing Corporations shall continue to collect mark to market margins from such market participants against such positions."
Key Highlights
1. Scope of the Early Pay-in Facility Clearing Corporations are required to provide an early pay-in facility enabling market participants to deposit certified goods at the Clearing Corporation's accredited warehouse against their relevant derivatives contract positions.
2. Margin Exemption Based on Risk Perception For positions against which early pay-in has been completed, Clearing Corporations are permitted — based on their risk assessment — to exempt such positions from all types of margins otherwise applicable.
3. Continued Applicability of Mark-to-Market Margins Notwithstanding the above exemption, Clearing Corporations are required to continue collecting mark-to-market (MTM) margins from market participants in respect of such positions. This ensures that while upfront margin relief is extended, daily price-risk exposure continues to be monitored and collateralised.
Effective Date
The provisions of this circular shall come into effect from September 21, 2026.
Compliance Obligations for Stock Exchanges and Clearing Corporations
Recognized Stock Exchanges and Clearing Corporations operating a Commodity Derivatives Segment are directed to:
- Make the necessary changes to their systems to give effect to the revised provision;
- Bring the provisions of this circular to the notice of their members; and
- Disseminate the circular on their respective websites.
Regulatory Basis
This circular has been issued by SEBI in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchange and Clearing Corporations) Regulations, 2018, with the objective of protecting the interests of investors in securities and promoting the development and regulation of the securities market.
Conclusion
This clarification provides much-needed certainty to market participants and Clearing Corporations regarding the treatment of margins on positions backed by early pay-in of certified goods. By allowing risk-based exemption of margins other than MTM margins, SEBI seeks to incentivise early delivery and reduce the cost of carrying positions for participants who proactively settle their obligations, while ensuring that price-risk monitoring through MTM margins remains uninterrupted.
Stock Exchanges and Clearing Corporations are advised to undertake the requisite system and process changes well in advance of the September 21, 2026 effective date to ensure smooth implementation.
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