MCXCCL pays Rs 2.7 Cr To Sebi To Settle Violations Case

New Delhi: Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) on Tuesday settled a case related to the calculation of the margin shortfall block amount with the markets regulator Sebi after payment of Rs2.7 crore.

This settlement pertains to alleged violations of the Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (SECC Regulations). MCXCCL paid the amount to settle the alleged violation and accordingly Sebi, in its settlement order, confirmed that "any proceedings that may be initiated for the violations ... are settled in respect of the applicant".

The settlement was reached following a suo motu application filed by the entity whereby it proposed to settle the alleged violation "by neither admitting nor denying the findings of fact and conclusions of law" through a settlement order.

The alleged violation revolved around the calculation of the margin shortfall block amount by MCXCCL. During the annual inspection of the applicant for the period spanning December 2022 to October 2023, it was observed that MCXCCL had blocked the highest margin shortfall instead of the cumulative margin shortfall over the preceding 30 days from the deposits of the clearing member. This approach was identified as inconsistent with the prescribed regulatory framework for calculating the 'Margin Shortfall Block Amount'.

According to the Regulations, in cases of repeated margin or pay-in shortfalls beyond a certain threshold by any member within a month, commodity derivatives exchanges are required, as a risk mitigation measure, to charge initial margins at a higher rate for the following month.

Alternatively, they must subject the member to a penal exposure-free deposit, equivalent to the cumulative funds or margin shortfall over the previous month.

This deposit is to be maintained with the exchange for the next month. By blocking the highest margin shortfall instead of the cumulative margin shortfall, MCXCCL was alleged to have violated SECC Regulations.