The Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) on May 06, 2026, issued circular on Alternate Risk Management Framework Applicable in case of Near Zero and Negative Prices.
The Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) has outlined the applicability of the Alternate Risk Management Framework (ARMF) for commodities prone to near zero or negative prices, specifically Crude Oil and Natural Gas. This is in continuation of its earlier circular dated April 09, 2026. Pre-expiry margins for these commodities will continue as per existing guidelines.
The ARMF will be triggered based on certain indicative conditions such as a sharp price fall exceeding 50% within 20 trading days, global exchanges introducing similar measures, availability of near-zero or negative strike options, or any other signals indicating the possibility of negative prices. Additionally, specific threshold prices have been defined for June 2026 (e.g., ₹1851 for Crude Oil and ₹158.50 for Natural Gas), below which the framework may be activated after review by MCXCCL in consultation with MCX.
Once triggered, the framework prescribes stricter risk measures including absolute minimum initial margins, enhanced Extreme Loss Margins (ELM), withdrawal of spread margin benefits, and adoption of the Bachelier model for option pricing. It also introduces additional margins linked to price declines, ranging from 50% to 125% of MTM depending on the extent of the fall.
These measures aim to strengthen risk management during extreme market conditions and will be applicable for the month of June 2026, with MCXCCL retaining the right to impose further margins based on market movements.
[Circular No. MCX/MCXCCL/264/2026]
