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Sebi revises warehousing norms for commodity bourses

28 Sep 2016

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Market regulator Securities and Exchange Board of India (Sebi) has revised warehousing norms for commodity derivative exchanges and has directed  national commodity derivative exchanges to frame guidelines in accordance with the revised norms for their accredited WSPs, warehouses, assayers, etc.

Sebi said these norms are the minimum requirements / standards for compliance by the exchange accredited WSPs, warehouses and assayers in addition to the minimum requirements for warehouses as those laid down by Warehousing Development and Regulatory Authority (WDRA), any other government authority from time to time.

The exchanges are at liberty to prescribe additional norms / guidelines for compliance by their accredited WSPs, warehouses and assayers, if they deem so fit, Sebi said.

Sebi has asked exchanges to follow a transparent process for accreditation of WSP by issuing open advertisements in leading newspapers and / or putting the same up on the exchange website and through a transparent selection process thereafter.

The selection process being / to be followed for such accreditation should be displayed on the website of the exchange in advance.

The accreditation of the WSP should be done with the approval of the Risk Management Committee of the board of directors of the exchange. The exchange shall ensure that the application of the WSP / warehouses are processed within a stipulated time frame.

A WSP can be accredited with more than one exchange. In such case, no exchange can mandate that its WSP cannot provide services to another exchange. However, it should be ensured that same warehouse may not be shared by more than one exchange.

The accreditation of a WSP should, unless any expulsion proceedings pending against it, be subject to renewal after a period of 3 years considering WSP's performance during accreditation, quality of services and number of client complaints and effective resolutions thereof etc.

The renewal should be approved by the Risk Management Committee of the exchange. During the renewal process, the exchange and the WSP should continue to be responsible for the commodities stored till their final expiry date.

Sebi said the existing accreditation as on the date of the circular would be valid for 3 years from the date of this circular, thereafter would be subject to renewal.

To be an eligible participant, a WSP / promoters / promoter group of WSP should be a corporate body and in public warehousing business.

The promoters / promoter groups of the WSP should be responsible persons / entities of repute with a good business reputation and credibility, and who are in the business of public warehousing for at least 3 years as on the date of their operation and have knowledge of, and experience in, generally accepted warehousing and handling practices for commodities.

The exchange at its discretion, may relax the above norm of 3 years provided that the WSP or its promoter/promoter group meets all other criteria, submits an undertaking that it shall meet any additional norm specified by exchanges within the time frame as specified by it or 3 years whichever is earlier.

WSP and promoters/ promoter group of WSP should not have any record of serious violation of laws or being expelled by any exchange in the last three years. The exchange can take an appropriate undertaking from the WSP in this regard.

An accredited WSP should be a corporate body with a subscribed and paid-up share capital of Rs10 crore. It should also be providing warehousing services any single commodity worth over Rs10 core and more than one commodity with a minimum networth of Rs25 crore.

With respect to the existing accredited WSPs that are not in conformity with the above norms prescribed for share capital and networth, the exchanges are directed to ensure that such WSPs comply with the above norms latest by 31 March 2018.

Further, the exchanges have been asked to ensure that the value of the goods stored in the accredited warehouses of WSP should not, at any point of time, exceed 33 times of the net worth of the WSP.

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