SEBI's New SGF Rules: A Boost for Commodity Derivatives

The Securities and Exchange Board of India (SEBI) has introduced significant revisions in the rules governing the Settlement Guarantee Fund (SGF) for the commodity derivatives segment. The regulatory body announced these changes on Monday, aiming to ease compliance for clearing corporations operating in this segment.

Under the new framework, clearing corporations are now mandated to calculate the SGF coverage based on the simultaneous default of at least three clearing members, including their associates, which would create the highest credit exposure in stress scenarios. This marks a shift from the previous requirement, where SGF coverage was based on the default of at least two clearing members and 50 percent of the exposure from all clearing members.

In a discretionary move, SEBI also indicated that exemptions or relaxations from stringent SGF requirements could be granted on a case-by-case basis. Decisions will take into account the current market environment, the robustness of the risk management frameworks in place, and the overarching goal of safeguarding investor interests. This revised measure is already in effect, representing a proactive step in the dynamic regulatory landscape.