SEBI introduces Pre-expiry Margins to Restrain Negative Price Scenarios

February 26, 2021
Current Context: The Securities and Exchange Board of India (SEBI) will be introducing pre-expiry margins to curb negative price scenarios.
SEBI introduces Pre-expiry Margins to Restrain Negative Price Scenarios
  • This will help to strengthen the risk management framework.
  • The pre-expiry margins will be applicable to certain commodities which are under the Alternate Risk Management Framework (ARMF).
  • The SEBI will be introducing pre-expiry margins on cash-settled contracts from 1st April 2021. Under this, the commodities are deemed to be susceptible to possible near zero or negative price.
  • The pre-expiry margins will be imposed during the last 5 trading days which will be prior to the expiry date so that they will raise by 5% daily.
  • This will result in encouraging a significant reduction of open interest as the contract comes near to the expiry date.
  • Static Part: 
    • HQ of SEBI: Mumbai
    • Chairman of SEBI: Ajay Tyagi

Question: 

Q.1 Which of the following organisation announced to introduce pre-expiry margin to certain commodities of ARMF, in order to curb negative price scenarios?
a. RBI
b. SEBI
c. IRDAI
d. NABARD

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