This means that in case of the market moves in one direction and if those on the other side fail to square off their open position
In a relief to the commodities futures markets, the Securities and Exchange Board of India (Sebi) has relaxed norms for matched book for commodity derivatives contracts.
This means that in case of the market moves in one direction and if those on the other side fail to square off their open position, the exchange can use the tool for settlement giving an exit route to affected parties.
Penalty in such cases have been cut sharply, while the price at which such trades should be settled has been amended.
The regulator took the decision in view of past defaults in smaller commodities where prices were pulled on one side. If the buyer of a commodity wants to square off by selling his/her position but the market is all-sellers with lower circuits, he/she cannot exit.
The exchange has a tool to give him/her an exit by making him pay some penalty calculated on settlement price.