Circular No. HO/47/16/14(1)2026-MRD-POD1/I/7115/2026; Dated: 16.03.2026
1. Background and Context
The Securities and Exchange Board of India (SEBI) has revised the coverage norms applicable to the Core Settlement Guarantee Fund (SGF) under the Commodity Derivatives segment. These revisions are aimed at strengthening the risk management framework governing Clearing Corporations and enhancing the resilience of the settlement ecosystem against member defaults.
2. Revised Coverage Norms for Core SGF
2.1 Revised Default Scenario for Credit Exposure Computation
Clearing Corporations are now required to compute their credit exposure based on the simultaneous default of at least 3 clearing members. This replaces the earlier methodology, which was based on the default of 2 clearing members plus 50% of all clearing members.
2.2 Significance of the Revision
The upward revision in the number of simultaneous defaults to be considered strengthens the stress-testing framework by:
- Accounting for a broader and more severe default scenario.
- Ensuring that the Core SGF corpus is adequately funded to withstand systemic shocks.
- Aligning the commodity derivatives segment’s risk coverage with more robust prudential standards.
3. Exemptions and Relaxations from SGF Provisions
3.1 Power to Grant Exemptions
SEBI may, after due deliberation, grant exemptions or relaxations from the strict enforcement of provisions relating to the Settlement Guarantee Fund (SGF) in the commodity derivatives segment. Such exemptions shall be considered on a case-to-case basis.
3.2 Factors to be Considered
Before granting any exemption or relaxation, SEBI shall take into account the following:
- Prevailing Market Conditions – the broader economic and market environment at the time of the request.
- Adequacy of the Applicable Risk Management Framework – whether the existing safeguards are sufficient to compensate for any deviation from standard SGF norms.
- Overall Objective of Investor Protection – ensuring that any relaxation does not compromise the safety and integrity of the settlement system or the interests of investors.
3.3 Nature of Exemptions
The exemption mechanism is discretionary and deliberative in nature, ensuring that no blanket relaxations are granted. Each case will be assessed independently against the above parameters, preserving regulatory flexibility while maintaining systemic safeguards.
4. Effective Date
The circular shall come into force with immediate effect from the date of its issuance.
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