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Risk Management

Risk Management

The exchange adopts various tools and practices to protect the market participants against adverse market conditions. It identifies and evaluates the risks through Risk Preventive Measures.

Risk Preventive Measures

Margining System

  • Initial Margin: Initial margin is the VaR based margin, subject to a minimum Base Margin approved by the regulator for the respective commodity.
  • Extreme Loss Margin: Margins to cover the loss in situations that lie outside the coverage of the VaR based initial margins.
  • Additional Margin: The margin over and above the initial margin which is levied due to price volatility in the short period.
  • Regulatory Margin: Margin recommended by regulator to be levied in a particular commodity contract based on the market intelligence or to curb abnormal price movement.
  • Long Margin/Short Margin: When the margin is imposed only to buyer or seller against their position that margin is called long and short margin respectively.
  • Tender and Delivery Period Margin: The Margin imposed during the tender and delivery period of the contract. Purpose of this margin is to enable smooth settlement of trade during the expiry.

Margin Utilization Warning Limit

Different level of Collateral warning (i.e. margin utilization) limits have been defined by the Exchange based on the margin utilized % of Trading Members & Clearing Members against their positions.

  • First Collateral Warning%:The first collateral warning limit alert will be sent to members on breach of 50% of margin utilized of their collateral.
  • Second Collateral Warning%:The second collateral warning limit alert will be sent to members on breach of 75% of margin utilized of their collateral.
  • Risk Reduction Mode (RRM)%: RRM mode will trigger and an alert will be sent to members as the collateral utilization level breaches 90% of the total margin limit.
  • RRM Revoke%:The RRM mode will be revoked and an alert will be sent for revoke of RRM mode as the collateral utilized amount reaches below 89% of the total margin limit.
  • Square off%:The members will be placed into margin square off mode and an alert will be sent as the collateral utilized amount goes beyond 100% of the total margin limit.

Risk Reduction Mode (RRM)

The trading members/clearing members are mandatorily put in risk-reduction mode when 90% of the member’s margin limit gets utilized. The risk reduction mode shall include the following:

  1. All unexecuted orders shall be cancelled once trading member himself or his clearing member breaches 90% collateral utilization level.

  2. Only Market & Limit orders with Immediate or Cancel (IOC) validity shall be permitted in this mode.

  3. All new orders shall be checked for sufficiency of margins and such potential margins shall be blocked while accepting the orders in the system.

  4. The trading member shall be moved back to the normal risk management mode (i.e. revoked from RRM mode) as and when the margin utilization level of the trading member as well as his clearing member goes below 89%.

MTM Loss Limit

During the trading session, the system keeps track of loss, both notional and booked, incurred by every member up to the last executed trade. Based on this MTM loss, the Exchange has defined different level of MTM alerts as a measure of risk management. The trading members/clearing members of the Exchange shall get MTM warning alerts on real-time basis. For calculation of MTM loss, the MTM loss limit is specified as 100% of the total margin limit.

Four types of alerts get generated for breach of MTM limit % at Member level.

  • First MTM Warning % i.e. 50%: The first MTM warning alert will be sent as the MTM loss breaches 50% of the MTM loss limit.
  • Second MTM Warning i.e. 60%: The second MTM warning alert will be sent as the MTM loss breaches 60% of the MTM loss limit.
  • Third MTM Warning i.e. 70%: The third MTM warning alert will be sent as the MTM loss breaches 70% of the MTM loss limit.
  • MTM Deactivation Limit % i.e. 75%: The square off mode will be triggered due to MTM and an alert will be sent as the MTM loss breaches 75% of the MTM loss limit. All pending orders will be cancelled and only square off orders will be allowed on trigger of square off mode with IOC validity. A member can’t place fresh orders in this mode.

As the MTM loss reaches below MTM deactivation limit%, the square off mode will be revoked and an alert will be sent for the same.

Position Limit

  • Client Wise A client is allowed to hold the maximum quantity of open position in a particular commodity contract/contracts.
  • Member Wise: A member is allowed to hold the maximum quantity of open position including all their clients in particular commodity contract/contracts.
  • Near and Far month Position Limits: Open position in the contract which is nearby to expiry months may be different than that of far months. Generally the open position limit is reduced in nearby month expiry contracts. A buyer/seller has to reduce his position to permissible position limit in the contract.

Daily Price Range (DPR Limit):

Each contract has a fixed price band. The trade is allowed within the given price range. The range is typically fixed through a standard percentage as per the daily price volatility of the commodity. In case of special circumstances based on the fundamentals of the commodity the daily price range is revised.

Mark to Market of Positions on Daily Basis:

All the outstanding position of the market participants are marked on daily basis to the closing market price of the contract. The mechanism ensures that the gain/loss relative to commodity price movement is adjusted on daily basis by debit/credit of respective members settlement account before commencement of the trade next day.

Settlement Guarantee Fund

Value At Risk (VaR)

Value at Risk (VaR) measures the largest loss likely to be suffered on a portfolio position over a particular period with a given confidence level. VaR is measured in three variables: the amount of potential loss, the probability of that amount of loss and the time frame.

Daily Margin

No data found

(Data available from August 2017)


No Data Found!

Stress Test Result

  • exchange-deliverable-stock-position_November
  • Stress Test Result_Q1_2018-19
  • Stress Test Result_Q4_2017-18
  • Stress Test Result_Q3_2017-18

The members are requested to contact at the following address for all their Risk related queries:

Indian Commodity Exchange Limited (ICEX)

Risk Department
Reliable Tech Park, 403-A, B-Wing, 4th Floor, Thane-Belapur Road,
Airoli (E), Navi Mumbai – 400708, Maharashtra, India.

For Risk:
Call us on +91-22-40381549 / 1552