The MCX (Multi Commodity Exchange) collects an additional margin on Crude Oil & Natural Gas contracts on the last 5 trading days before expiry (called “tender period”). The additional margin will be applicable from April 2021 expiry onwards as per this exchange circular.
The additional margin amount (also called the pre-expiry or tender margin) is blocked from your commodity account funds under the ‘delivery margin’ field as shown below:
For instance, the expiry day for the April 2021 Crude Oil contract is on the 19th. The additional tender margin will be levied as a percentage of the contract value in the following manner:
| April 13th, 2021 | 5% |
| April 14th, 2021 | 10% |
| April 15th, 2021 | 15% |
| April 16th, 2021 | 20% |
| April 19th, 2021 | 25% |
The additional tender margin on commodities is charged to cover the risk of large price fluctuations in commodity contracts that can happen close to expiry.
You can also check out this circular on SEBI’s Alternate Risk Management Framework to know more about tender or pre-expiry margins.
