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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI - SEBI/HO/CDMRD/DMP/P/CIR/2021/551

Extract

..... ry. To fulfil this obligation, it is imperative on the part of the Clearing Corporations to ensure that their accredited storage facilities exercise due diligence for safety and quality of the goods deposited with them for the purpose of delivery on exchange platform. 2. It is, therefore, incumbent upon the Clearing Corporations to put in place a comprehensive framework of norms for adherence by the Warehouse Service Providers (hereinafter referred to as “WSP/s”), assayers and other allied service providers engaged by them for ensuring good delivery as mandated under the SECC Regulations. 3. At the outset, it is clarified that the norms prescribed in this Circular are the minimum requirements/standards which the Clearing Corporation will set out for compliance by its accredited WSPs and assayers and are to be complied with in conjunction with the applicable norms laid down by Warehousing the warehousing or storage infrastructure and its ancillary services for the respective goods. 4. The Clearing Corporations are at liberty to prescribe additional norms/guidelines for compliance by their accredited WSPs, warehouses and assayers, if they deem so fit, for ensuring good de .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... ldquo;Circulars” and “Info for Commodity Derivatives”. Yours faithfully, Naveen Sharma General Manager Division of Market Policy Commodity Derivatives Market Regulation Department Email: naveens@sebi.gov.in Annexure 1. Accreditation of Warehouse Service Provider (WSP) 1.1. For accreditation of WSPs, the Clearing Corporation shall publish open advertisements in leading newspapers and/or put up the same on their website and follow transparent selection process thereafter. The selection process to be followed for such accreditation shall be displayed on the website of the Clearing Corporation before the process begins. The Clearing Corporation shall ensure that the applications of the WSPs are processed within a stipulated time frame. Note: For the purpose of this Circular, a WSP is an entity which provides a storage facility for storing underlying goods related to a commodity derivatives contract. 1.2. The Clearing Corporation shall ensure that the WSP had obtained the required registrations of the proposed storage facility from WDRA for commodities notified by WDRA and for other commodities under applicable law/s and the same shall be intimated by it to the Clearin .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... up of WSP shall have no record of serious violation of law of land including that of laws governing warehousing / securities markets; or being expelled by any Clearing Corporation/stock exchange in last three years. The Clearing Corporation can take an appropriate undertaking from the WSP in this regard. 3. Financial Soundness of the WSP 3.1. Share Capital 3.1.1. The Clearing Corporation shall ensure that an accredited WSP shall have subscribed and paid-up share capital of at least ₹ 10 crores. 3.2. Net-worth 3.2.1. An accredited WSP shall meet the following net-worth criteria: - Table 1: Net worth Requirement Type of Goods Number of Goods Minimum net worth A Agricultural / Agri-processed 1 ₹ 10 crores More than 1 ₹ 25 crores B Base / Industrial Metals 1 ₹ 10 crores More than 1 ₹ 25 crores C Composite* NA ₹ 50 crores *Composite means combination of A and B 3.2.2. In case of reduction in net worth of WSPs below the stipulated requirement, a time period of six months may be allowed to the WSPs to augment the net worth. In the event the WSP is unable to augment the net worth to the requisite level within the allowed time frame, the Clearing Corporat .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... al/Agriprocessed Up to ₹250 crores 2% of the aggregate value of stored commodities Between ₹ 250 crores and ₹500 crores ₹ 5 crores + 3% of aggregate value of stored commodities exceeding ₹ 250 crores Above ₹ 500 crores ₹ 12.5 crores + 4% of the aggregate value of stored commodities exceeding ₹ 500 crores Base / Industrial Metals NA 0.5% of the aggregate value of stored commodities 3.4.2. The Clearing Corporation, based on its risk assessment, can decide on restricting the amount of FSD to ₹ 100 Crores from each WSP. 3.4.3. The FSD shall be in the form of liquid assets with applicable haircuts and concentration limits as listed below: - Table 3: Composition of FSD Type Minimum haircut Limits Cash 0 No limit but minimum 10% Bank Fixed Deposit 0 Bank Guarantees 0 Remaining 90% FSD can be in any combination of the four types of options provided for furnishing the FSD Securities of the Central Government 10% 3.4.4. A daily monitoring of the FSD vis-à-vis the value of the goods stored shall be done marked to market on replacement value on ongoing basis to ensure that the minimum stipulated FSD are always maintained with the Cle .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... ulation of available FSD for the WSP. 3.6.3. The Clearing Corporation shall compensate the aggrieved client, in accordance with its rules, regulations etc., by debiting the FSD of WSP held with it, in the following situations: 3.6.3.1. for any such losses that have been appropriately established against the WSP 3.6.3.2. in case of loss arising from any action or inaction of its WSP or on the part of its warehouses that prevents the buyer or seller from exercising, in whole or in part, their rights. 3.6.4. In case the FSD available with Clearing Corporation is not sufficient to compensate for the loss the FSD and the SD maintained by such WSP with WDRA shall be made available to Clearing Corporation within 7 days of the release request from Clearing Corporation to WDRA, for settlement of the remaining claims. 3.6.5. The settlement of security deposit by WDRA originates only after the goods stored, if any, are disposed of / withdrawn by the holder. 3.6.6. The discrepancy noted / claim received by any agency (Clearing Corporation or WDRA) shall be brought to the notice of other agency irrespective of invoking the security deposit. 4. Fit and Proper Criteria 4.1. The Clearing Corporati .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... ly, and are providing broking services will be permitted to trade in that commodity on that stock exchange only for their clients (i.e. non-proprietary) subject to stock exchange ensuring that the particular entity does not extend direct/indirect funding to its clients for trading in those commodities. 5.1.5. If the stock exchange is providing exemptions as mentioned in Para 5.1.4 above, then it should put in place appropriate controls so that the WSPs do not exercise preferential treatment to such entities which may act as disadvantage to other market participants. 5.1.6. The Clearing Corporation may obtain, and share with Stock Exchanges, an annual declaration from the compliance officer of WSP to the effect that the WSP/Management of WSP or entities owned or controlled by management of WSP/Group concerns directly or indirectly or persons ‘acting in concert’ have not traded on exchange. Such declaration may be obtained within a month of end of the financial year. 5.1.7. The Clearing Corporation shall ensure that the WSP always has adequate number of competent employees who have the experience, capacity and ability of operating the business without any conflict of inte .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... all goods 8.1.1. The Clearing Corporation shall ensure that the storage facilities provided by the WSP are under absolute control of the WSP. In case a storage facility is a leased property it should be ensured by Clearing Corporation that no third party including the owner / lessor of the storage facility, has any role to play in the operations and managing the concerned storage facilities operated by the WSP. 8.1.2. The Clearing Corporation shall ensure that the accredited WSPs have reasonable facility and infrastructure for proper handling and storage of commodity as specified under: 8.1.2.1. All its storage facilities are well connected with rail and/or road networks and have sufficient space for parking and movement of loading/unloading vehicles. 8.1.2.2. All its storage facilities have adequate equipment, installed and maintained in good working order, as may be prescribed by the Clearing Corporation, for the movement of commodities into, out of and within the storage facility. 8.1.2.3. All its storage facilities are physically and operationally suitable for the proper storage of commodities and are of sound construction and in a state of good repair. 8.1.2.4. All its storage .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... have knowledge and experience in sampling, weighing, inspecting and/or grading of commodities. 8.1.5. Clearing Corporations shall ensure that the WSPs always gives priority to commodities meant for derivatives contracts delivery while receiving, storing and dispatching goods, in case its warehouse is also permitted to store goods not meant for delivery on exchange platform. The Clearing Corporation shall ensure that WSP should have internal process that enables it to physically verify, by deputing its officials or through any agencies / experts engaged by it, the goods deposited, the facilities available in such warehouse, or to inspect the level of compliance of the warehousing norms stipulated by the Clearing Corporation/regulator from time to time. 8.1.6. The Clearing Corporation to ensure that WSP shall be responsible to accept the goods/commodities in warehouses which meets the quantity and quality parameters as per the exchange contract specifications. The WSP shall take necessary steps to maintain the quality and quantity of goods stored in the warehouse, in accordance with the conditions/parameters (for maintaining the quality) as laid down by the exchanges for each of suc .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... rimeter/boundary. Loading and unloading shall always take place within the perimeter/boundary of the warehouse and not in a public area. 8.3.1.2. All its storage facilities are of sound construction and in a state of good repair and floor properly levelled and can bear the load of the weight of the stored metals. The walls, the floor and the roof do not permit water seepage. 8.3.2. The Clearing Corporation shall ensure that the ferrous metals are stored by WSP in a manner so as to prevent distortion, corrosion, scaling and rusting. They shall be stacked/piled adequately above the ground level. 8.3.3. The Clearing Corporation shall ensure that the WSP undertakes to have assaying/testing facilities for the commodities it intends to offer warehousing facility, or shall undertake to be associated with an assaying/testing agency which may preferably be certified by one or more national/ international agencies as specified by the Clearing Corporation. 9. Standard Operating Procedure (SOP) and Standards 9.1. ISO or other Relevant Standards 9.1.1. In case the Clearing Corporations prescribes relevant ISO standards and/or its equivalent, then the Clearing Corporation shall ensure that the W .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... Clearing Corporation within three days of initiation of any civil and criminal proceedings by or against it and shall also intimate the Clearing Corporation if there is probability of any such legal proceedings being initiated involving it, as soon as the same comes to the knowledge of the WSP. 10. Sampling Procedure 10.1. The Clearing Corporations shall ensure that, wherever assaying is carried out by WSPs, adequate samples of goods are collected/retained from the goods deposited and are sealed in the presence of the depositor or his authorized representative. 10.2. In order to resolve potential disputes arising with respect to the quality of goods, if any, it is advised that at least four samples are taken of which one sample is used for analysis, one is kept with the WSP for comparison purpose, one is given to the depositors while one is kept for record/lab reference purpose. 11. Accreditation of assayers 11.1. The Clearing Corporations shall follow a transparent process for accreditation of assayers by issue of open advertisement in leading newspapers and/or by putting up the same on the website of the Clearing Corporation. The process to be followed for such accreditation shal .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... WDRA or not, comply with the insurance guidelines/norms issued by the WDRA. 14. Embracing new technology 14.1. The Clearing Corporations shall strive to adopt the latest technology for routine and surprise inspections/audits, monitoring and surveillance of the warehouses etc. 14.2. The Clearing Corporation shall ensure that to the extent possible the WSP to be accredited by them has adopted or shall adopt the latest technology with respect to the operations of the warehousing business. The Clearing Corporation may identify the areas where use of latest technology can be mandated by it and provide a timeframe to its WSPs for adoption of the same. 15. Monitoring / Inspection / Audit 15.1. Periodic inspection/audit by WSPs 15.1.1. The Clearing Corporation shall ensure that there is periodic inspection/audit by the WSP of the storage facilities and the goods stored therein. 15.1.2. The Clearing Corporation shall ensure that the staff of the WSP conducting inspection is independent of the employees / staff deputed at the registered storage facility. 15.1.3. The Clearing Corporation shall ensure that the inspection/audit report is submitted to the Clearing Corporation within 15 days of .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... g, monitoring and compliance of norms by WSPs, storage facilities and assayers may be one of the agenda items in all Board meetings as well as other relevant committee of Board of the Clearing Corporation in terms of the SECC Regulations, 2018. 15.3.4. The Clearing Corporations and WSPs shall ensure that the goods whose final expiry date (FED) is over, are removed from the concerned warehouse immediately, but not later than 3 months from the date of the final expiry date. However, it is clarified that WSP shall ensure proper demarcation of goods which have crossed FED and where follow ups have been done may be considered compliance of guidelines by WSPs. If there is space constraint, the Clearing Corporations shall identify new warehouse nearby for deposit of goods. Note: For the purpose of this Circular, FED is the date after which the goods cannot be delivered for settlement of derivatives contracts on the exchange platform. 15.3.5. To further strengthen the process of monitoring, the Clearing Corporations shall mandate their WSPs to submit the report of the inspections carried out by the statutory authorities like WDRA to the Clearing Corporations within 2 weeks from the receipt .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... nst WSPs as mentioned in Para 21 of the Circular, if the storage facility is unable to meet the requirements of an accredited storage facility and fails to improve the standard within the stipulated timeframe. 16.Code of conduct 16.1. The Clearing Corporation shall frame code of conduct for the WSPs, storage facilities and assayers which shall be disclosed on the website of the Clearing Corporation. 17. Grievance Cell 17.1. The Clearing Corporation shall ensure that it has a Grievance Cell to handle the investor complaints. 17.2. The Clearing Corporation shall take proactive steps to resolve client/customer related issues and maintain a record of complaints received and resolved. 17.3. The Clearing Corporation shall require the WSP to report the details of complaints received, resolved by it, pending and action taken on the complaints, once in very fortnight. 18. Monthly Information System (MIS) 18.1. It is desirable that there should be electronic record of information at the WSP and a MIS system with an arrangement for flow of real time information from the storage facility location to the central MIS and onwards to the Clearing Corporations electronically. The MIS should have th .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... g Corporations, which shall not be released until six months after cancellation or surrender of accreditation of the WSP or until satisfaction of all claims against the deposits made in its warehouses, whichever is later. 19.5. A WSP which surrenders its accreditation with the Clearing Corporations shall not be eligible to provide its services to the same Clearing Corporations for a period of 3 years. 19.6. Once the accreditation of a WSP is cancelled by a Clearing Corporation then it shall not be eligible to provide its services to any other Clearing Corporation for 3 years. 19.7. Adequate notice intimation to general public / clients should be given by the Clearing Corporation through widely published newspapers and website etc. before accepting the surrender of WSP or cancellation of the WSP. 20.Business Continuity Plan 20.1. The Clearing Corporations shall ensure that the WSP shall put in place, a business continuity plan and submits such plan to the Clearing Corporation. 21. Actions against WSPs 21.1. The Clearing Corporation may frame norms for its accredited WSPs to rectify or correct their misconduct or misconduct on the part of any of its approved warehouses used for stori .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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..... ceptance/rejection of goods by the storage facility concerned, details of empaneled assayers and independent assayers, if any, attached to the storage facility etc., on their websites. 23.1.3. FED wise stock position in approved warehouses. 23.1.4. Quantum of goods physically withdrawn by the holders. 23.1.5. Commodity wise %age of deposits held by top 3, 5 & 10 beneficiary owners for commodity as under: Table 7: Commodity wise percentage of overall deposits held in various warehouses Commodity A Commodity B Commodity C Commodity D and so on Top 3 Top 5 Top 10 Others 23.2. Monthly disclosures on the following: 23.2.1. A summary of number of complaints with status as per the following format: Table 8: Summary of WSP wise status of complaints WSP wise status of complaints for Month ended WSP Name No. of complaints received during month No. of resolved month complaints during No. of complaints pending for month with reasons for pendency 23.2.2. A summary of nature of complaints received as per the following format: Table 9: Summary on nature of complaints Month ending Nature of Complaint Name of WSP 1 Name of WSP 2 ……. Name of WSP n Total Total 23.2.3. Details of the .....

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Guidelines for warehousing norms for agricultural/agri-processed goods and non-agricultural goods (only base/industrial metals) underlying a commodity derivatives contract having the feature of physical delivery - SEBI

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