The Multi Commodity Exchange Clearing Corporation Limited (MCXCCL), on July 2, 2026, issued the Alternate Risk Management Framework (ARMF) applicable in situations involving near zero or negative prices for commodity derivatives. The framework applies to Crude Oil and Natural Gas contracts and prescribes conditions for activation based on indicators such as sharp price declines, introduction of negative pricing measures by international benchmark exchanges, availability of near zero/negative strike options, or other market conditions signalling the likelihood of negative prices.
The circular specifies the threshold prices for August 2026, below which the ARMF will be triggered, namely ₹1,851 per unit for Crude Oil (including Crude Oil Mini) and ₹158.50 per unit for Natural Gas (including Natural Gas Mini). Upon activation, the framework prescribes absolute minimum initial margins, minimum Extreme Loss Margins (ELM), withdrawal of spread margin benefits, adoption of the Bachelier Model for option pricing, and additional margins linked to the extent of price decline.
Further, MCXCCL has clarified that additional margins ranging from 50% to 125% of the mark-to-market (MTM) loss may be imposed depending on the magnitude of the price fall, while reserving the right to levy any further margins based on prevailing market conditions. The provisions of the circular shall be applicable for the month of August 2026.
[MCX Circular No. MCX/MCXCCL/379/2026]
