Sebi Proposes Revamp of Stress-Testing Norms and SGF Coverage
Sebi is proposing updates to stress-testing norms and Settlement Guarantee Fund coverage for commodity derivatives. Suggestions include lowering the historical stress-testing Z-score and adjusting SGF coverage criteria. These proposals are based on feedback and working group recommendations, with public comments invited until February 26.
- Country:
- India
The Securities and Exchange Board of India (Sebi) unveiled a set of proposals aimed at refining stress-testing norms and Settlement Guarantee Fund (SGF) coverage for the commodity derivatives market.
Among the notable proposals is a reduction in the Z-score used in historical stress-testing scenarios from 10 to 5. Sebi argued that this revised threshold would still adequately capture "extreme but plausible" market shocks, which have been historically observed or could likely occur.
Further changes include modifying the SGF coverage by eliminating the necessity to cover 50% of the credit exposure due to clearing members' defaults. Instead, SGF coverage would focus on the simultaneous default of at least three clearing members and their associates with the highest exposure. These proposals have been put forth following representations from market participants and recommendations from a working group on agricultural commodity derivatives, backed by Sebi's Risk Management Review Committee. Public feedback is open until February 26.
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