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SEBI modifies the Z-score requirement for standardized stress testing in the commodity derivatives segment. Clearing corporations must now use a Z-score of 5 to replace extreme price movements in peak historical returns. This replaces the previous requirement of a Z-score of 10. This change applies to all recognized clearing corporations that operate a commodity derivatives segment. The update aims to facilitate ease of doing business based on stakeholder representations and Risk Management Review Committee recommendations. The new requirement takes effect immediately.
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[Image omitted. See the official document.]
CIRCULAR
HO/47/16/14(1)2026-MRD-POD1/I/18580/2026
August 12, 2026
To,
The Managing Directors / Chief Executive Officers, All Recognised Clearing Corporations having Commodity Derivatives Segment
Sir / Madam,
Subject: Review of Inclusion of Historical Scenarios in Stress Testing for Commodity Derivatives Segment
“Core Settlement Guarantee Fund (Core SGF) – Annexure O
- Standardized Stress Testing for Commodity Derivatives
Part A. Scenarios
Historical Scenarios
1 Peak Historical Return
Price movement in respect of each underlying over the MPOR period during the last 15 years to be considered:
Scenario 1A: Maximum percentage rise over MPOR period Scenario 1B: Maximum percentage fall over MPOR period
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.”
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SEBI has received representations to review the aforementioned extant provision related to Z-Score for Commodity Derivatives Market.
Based on representations received from stakeholders, recommendation of the Risk Management Review Committee (RMRC) and public comments received, and with the objective of facilitating Ease of Doing Business, it has been decided to modify the provisions contained in Part A (with respect to Z-score) of paragraph 22 (“Standardized Stress Testing for Commodity Derivatives”) of Annexure O of SEBI Master Circular for Commodity Derivatives Segment dated Aug 04, 2023, as under:
“Part A. Scenarios
Historical Scenarios
1 Peak Historical Return
.........
Price movements corresponding to a Z-score of 5 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 come into force with immediate effect.
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 Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
The Circular is issued with the approval of the competent authority.
This Circular is available on SEBI website www.sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”.
Yours faithfully,
Neetika Rajpal Deputy General Manager Market Regulation Department Email: neetikar@sebi.gov.in Phone Number: 022-26449628
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