Warehouse Service Provider
Also written WSP · Warehouse Service Provider (WSP) · Warehouse service providers
The company accredited by a clearing corporation to store exchange-deliverable commodities — WDRA-registered for agricultural goods, capped at 33 times its net worth, and barred from trading in what it stores.
In plain language
The exchanges do not own warehouses. They do not want to: storing mustard seed is a business with its own risks, and an exchange that owned the godown would be judging the quality of goods it was itself responsible for.
So storage is outsourced. A Warehouse Service Provider runs the facilities — warehouses, silos, marine vessels, cold storage, sheds, tanks or pipelines, depending on the commodity — and the clearing corporation empanels it against published criteria.
The accreditation comes with a long list of conditions, because a WSP sits at the exact point where a paper contract turns into a physical thing. If the goods are not there, or are not what the certificate says, the whole settlement guarantee is worth nothing.
How it works
The conditions SEBI prescribes are minimums; exchanges may add more.
Who may be one. A WSP shall be a company under the Companies Act. Minimum net worth ranges from Rs 10 crore to Rs 50 crore, by category of goods stored. Accreditation follows a transparent process — open advertisements in leading newspapers and/or the clearing corporation's website, then a transparent selection.
The exposure cap. The value of goods stored in a WSP's accredited facilities shall not at any point exceed 33 times its net worth, and that cap applies irrespective of the number of clearing corporations it serves. Clearing corporations must obtain information from WSPs to police it.
The trading bar. The WSP, its key managerial personnel and whole-time directors and their relatives, entities owned or controlled by its promoters or management, group concerns, associates and persons acting in concert are not allowed, directly or indirectly, to trade on the exchange in the commodity for which it is accredited. The clearing corporation shall not provide any exemption.
Who registers what. For agricultural commodities, only WDRA-accredited warehouses may be empanelled. The workbook is precise: WDRA registers and recognises each warehouse separately, not the WSP. SEBI requires at least one warehouse in each delivery centre within a 100 km radius.
Ongoing obligations. A compliance officer, who declares compliance to the clearing corporation at intervals it directs. A Know Your Depositor policy. Storage facilities under the WSP's absolute control, with no role for a lessor. Segregation of exchange-delivered from non-exchange goods. Assaying and testing facilities, or association with an agency preferably certified by NABL or BIS. Staff trained, or deputed to the certification programme conducted by NISM. An annual review and appraisal of each WSP's operational performance by the clearing corporation.
A WSP may serve more than one clearing corporation, and one storage facility may be used by more than one with proper segregation — but the same facility shall not be used by more than one clearing corporation for the same commodity.
A worked example
A WSP with a net worth of Rs 20 crore wants to know how much it can hold.
Exposure cap = 33 x Rs 20 crore = Rs 660 crore of goods, at any point in time
At a chana price of Rs 5,500 per quintal:
Rs 660 crore / Rs 5,500 per quintal = 12,00,000 quintals = 1,20,000 MT
On the workbook's 10 MT lot, that is 12,000 lots of deliverable stock — the whole of its capacity, across every clearing corporation it serves.
Now the trap. Suppose it is accredited with two clearing corporations and reasons that Rs 660 crore is available to each. It is not. The cap is irrespective of the number of clearing corporations, so Rs 400 crore held for one leaves only Rs 260 crore of headroom for the other.
And separately: its managing director may not buy a single chana futures contract on the exchange, nor may a company his brother controls. No exemption is available for either.
Why NISM asks about it
Chapter 7 (Clearing, Settlement and Risk Management), section 7.4.5, with the ecosystem introduction in Chapter 1 section 1.6. Expect the 33 times net worth cap, the Rs 10 crore to Rs 50 crore net worth range, the 100 km delivery-centre radius, and the precision point that WDRA recognises each warehouse rather than the WSP.
Common exam traps
- 33 times net worth, across all clearing corporations, not per corporation. The workbook says "irrespective of the number" twice.
- WDRA registers warehouses; the clearing corporation accredits the WSP. Two different authorities doing two different things.
- The trading bar admits no exemption, and it extends to relatives, group concerns and persons acting in concert — not just the company.
- A WSP may serve several clearing corporations, and one facility may too — but never two clearing corporations for the same commodity.
- The storage facility must be under the WSP's absolute control. A leased godown where the lessor retains an operational role does not qualify.
- Net worth ranges from Rs 10 crore to Rs 50 crore by category of goods. It is not a single figure.
Check yourself
1.What is the maximum value of goods a Warehouse Service Provider may hold in its accredited storage facilities?
- a)10 times its net worth
- b)33 times its net worth, irrespective of the number of clearing corporations served
- c)50 times its net worth per clearing corporation served
- d)There is no limit, provided the warehouse is WDRA accredited
Show the answer
Answer: (b) 33 times its net worth, irrespective of the number of clearing corporations served
The words "irrespective of the number of clearing corporations" are the point of the rule, and what makes option (c) wrong. A WSP serving three clearing corporations does not get three times the capacity — the cap is on the provider, not on each relationship. Otherwise a thinly capitalised operator could multiply its exposure simply by signing up more exchanges.
Alongside it sits the net worth requirement: ⚠️ "SEBI has prescribed MINIMUM NET WORTH CRITERIA OF Rs 10 CRORES TO Rs 50 CRORES for different categories of WSP BASED ON THE GOODS THEY STORE."
Read the two together and the design is clear: the WSP must have real capital of its own, and the goods it holds in trust for others are capped at a fixed multiple of it. A warehouse holding goods worth a hundred times its net worth could not make good even a modest loss.
Related requirements to remember: a WSP must be a company under the Companies Act; only WDRA accredited warehouses may be empanelled for agri commodities; and WDRA registers warehouses and recognises each warehouse separately rather than the WSP.
2.Which statement about warehouses in the commodity derivatives market is correct?
- a)National commodity exchanges own and operate their own warehouses at each delivery centre
- b)Exchanges set the criteria and empanel warehouse service providers; only WDRA accredited warehouses may be empanelled for agricultural commodities
- c)Warehouse service providers are registered by SEBI rather than WDRA
- d)A warehouse service provider may serve only one clearing corporation at a time
Show the answer
Answer: (b) Exchanges set the criteria and empanel warehouse service providers; only WDRA accredited warehouses may be empanelled for agricultural commodities
"THE NATIONAL COMMODITY EXCHANGES DO NOT OWN OR HIRE ANY WAREHOUSE for the purpose of settlement of contracts required to be settled by physical delivery. EXCHANGES SET THE CRITERIA FOR THE WAREHOUSES AND EMPANEL WAREHOUSE SERVICE PROVIDERS (WSPs)."
"As per SEBI Regulations, ONLY WDRA ACCREDITED WAREHOUSES CAN BE EMPANELLED AS WSPs by the clearing corporations FOR STORAGE OF AGRICULTURAL COMMODITIES which are meant for settlement of trades on exchanges."
Option (c) inverts the roles: "THE WDRA REGISTERS WAREHOUSES AND RECOGNIZES EACH WAREHOUSE SEPARATELY RATHER THAN WSP." Note the precision of that sentence — accreditation attaches to the individual warehouse, not to the company operating it.
Option (d) is expressly contradicted: "A WSP CAN BE ACCREDITED WITH MORE THAN ONE CLEARING CORPORATION. In such case, the clearing corporation SHALL NOT MANDATE THAT ITS WSP CANNOT PROVIDE SERVICES TO OTHER CLEARING CORPORATIONS." A single facility may even serve several, with "proper segregation, demarcation" — but with one limit: ⚠️ "THE SAME STORAGE FACILITY SHALL NOT BE UTILIZED BY MORE THAN ONE CLEARING CORPORATION FOR THE SAME COMMODITY."
What counts as a storage facility is broad: "WAREHOUSING, SILOS, MARINE VESSELS, COLD STORAGE, SHEDS, TANKS, OR PIPELINES, depending upon the nature of the commodity."
And the coverage requirement: ⚠️ "SEBI norms prescribe that there should be AT LEAST ONE WAREHOUSE IN EACH DELIVERY CENTRE WITHIN 100 KMS RADIUS."
Where this is taught
Free preparation for NISM Series XVIRelated terms
- Warehouse receiptA document of title issued by an exchange-accredited warehouse to whoever deposited goods in it, transferable by endorsement and deliverable against a short futures position.
- Compulsory deliveryA delivery logic under which every position still open at expiry must give or take physical delivery — neither side can elect to settle in cash.
- Know Your DepositorThe obligation on a Warehouse Service Provider to be able to identify, at any time, who deposited goods in its registered warehouses and who the actual beneficiary of those goods is.