For better price discovery, Sebi revises daily price limits in commodity contracts

Daily price limits in agricultural derivatives contracts and non agri derivatives contracts have been revised effective from April 1 this year. The method of calculation of base price for DPL has also been specified in the circular, which will ensure more robust price discovery on bourses like NCDEX, MCX, BSE, NSE and ICEX.

Sebi has revised the DPL for broad and narrow commodity contracts into two slabs -- initial slab is 4%, which if breached will be enhanced by 2% after a cooling off period of 15 minutes only in that contract. During the cooling off period trading will be permitted within the initial slab.

For sensitive commodities, the initial slab is 3% followed by 1% enhanced slab. The aggregate DPL for the first two contracts is 6% and that of the sensitive commodities is 4%.


After the DPL is enhanced trading will be permitted within the enhanced aggregate DPL. For non agri goods -- energy, metals and precious metals -- Initial slab is 6% followed by enhanced slab of 3% with aggregate DPL at 9%. Since these contracts mirror international contracts , trading beyond aggregate DPL of 9% is allowed .

For gems and stone , like diamond, aggregate DPL is 6% while for other non agri goods is 9%. In both these categories, trading beyond DPL is disallowed.

"Relaxing DPL results in better price discovery based on supply demand," said an exchange source on condition of anonymity. "The move is a good one."

In international commodities like gold, crude , etc if initial slab is breached in international markets during or after market hours in event of excess volatility , the domestic exchange can relax DPL directly by informing the market and the integrated surveillance department of Sebi .