SEBI Issues Consultation Papers on Commodity Derivatives and Margin Framework

The Securities and Exchange Board of India (SEBI) has initiated a series of consultation papers to enhance risk management practices in the derivatives market. The proposals focus on incorporating historical scenarios into the coverage of the Settlement Guarantee Fund (SGF) and stress testing frameworks for commodity derivatives. This move is designed to ensure greater resilience against extreme market events and safeguard investor interests.

SEBI is also reviewing the calendar spread margin benefit in single stock derivatives on expiry day. The review aims to address potential risks associated with margin benefits and ensure that market participants maintain adequate safeguards during high-volatility periods.

Key Highlights

• Settlement Guarantee Fund: Proposal to include historical scenarios for better coverage.
• Stress Testing: Enhanced framework for commodity derivatives to withstand extreme events.
• Margin Review: Calendar spread margin benefit in single stock derivatives under scrutiny on expiry day.
• Objective: Strengthen market stability, investor protection, and risk management.

SEBI’s consultation papers reflect its proactive approach to regulatory oversight, ensuring India’s derivatives market remains robust, transparent, and resilient.

Sources: SEBI consultation paper, Reuters, Business Standard