Know how the concentration margin works

The Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) released some revisions to the threshold limit for the concentration margin on November 3. So what is this concentration margin. These are the charges levied if the size of a participant’s position exceeds a certain limit of open interest. A non-agricultural commodity traded on the MCX will be eligible for the Concentration Margin Fee either if its open interest exceeds 5 percent of the open interest value on the exchange or if the amount traded exceeds a specified limit.

For example, Aluminum will be eligible to collect this tax if the open interest exceeds 16,800 metric tons (mt). For agricultural products, limits are specified. For example, the crude palm oil contract will be eligible for this charge if its open interest exceeds 90,000 mt. For participants, the concentration margin fee will be levied if the individual’s open interest exceeds a specific tranche in a product. If a participant’s open interest exceeds the open exchange interest by around 10-15%, then 2.5% for crude oil and 1.5% for other commodities will be charged as margin. of concentration. This is a charge in addition to other applicable margin charges. The limit will be calculated at the end of the day every day and will be made applicable for the following trading day.

Transactions carried out for hedging purposes will be exempt from the levy of this tax. But the relevant documents relating to the cover must be provided.

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