Review of inclusion of Historical Scenarios in Stress Testing in Commodity Derivatives Segment
Summary
SEBI amends stress testing norms for commodity derivatives by replacing extreme historical price movements with those corresponding to a Z-score of 10. This change addresses concerns arising from exceptional volatility, such as negative crude oil prices, following recommendations from the Risk Management Review Committee. The revised framework applies to all Clearing Corporations having a Commodity Derivatives Segment and is effective immediately upon issuance.
Text
Price movements corresponding to a Z-score of 10 will replace extreme price movements beyond that threshold in peak historical returns of all the commodities. Mean and sigma of returns over the applicable MPOR period across 15 years would be used for calculation of the Z-score.
The circular shall be effective from the date of its issuance.
This circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956.
Source: SecMarx — Review of inclusion of Historical Scenarios in Stress Testing in Commodity Derivatives Segment. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.