SEBI, through Circular No. HO/47/16/14(1)2026-MRD-POD1/I/18580/2026 dated August 12, 2026, has modified the Z-score threshold used for standardized stress testing of the Commodity Derivatives Segment. Under paragraph 22 of Annexure O of the SEBI Master Circular for Commodity Derivatives Segment dated August 4, 2023, price movements corresponding to a Z-score of 10 were earlier prescribed to replace extreme price movements beyond that threshold in peak historical returns of all commodities. Based on stakeholder representations, the recommendation of the Risk Management Review Committee (RMRC), public comments received, and with the objective of facilitating Ease of Doing Business, SEBI has revised the threshold from a Z-score of 10 to 5. The mean and sigma of returns over the applicable Margin Period of Risk (MPOR) across 15 years will continue to be used for calculating the Z-score. The revised provision applies with immediate effect. The circular has been issued 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.
Securities and Exchange Board of India
Circular No. HO/47/16/14(1)2026-MRD-POD1/I/18580/2026 | Dated: 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
1. SEBI Master Circular SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 for Commodity Derivatives Segment dated Aug 04, 2023, inter alia, prescribes norms related to Core Settlement Guarantee Fund (SGF). The extant provisions pertaining to applicable value of Z-Score (for the purpose of stress testing), as provided in paragraph 22 of Annexure O of the said circular are as follows:
“Core Settlement Guarantee Fund (Core SGF) – Annexure O
22) 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.”
2. SEBI has received representations to review the aforementioned extant provision related to Z-Score for Commodity Derivatives Market.
3. 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.”
4. The circular shall come into force with immediate effect.
5. 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.
6. The Circular is issued with the approval of the competent authority.
7. This Circular is available on SEBI website sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”.
Yours faithfully,
Neetika Rajpal
Deputy General Manager
Market Regulation Department
Email: [email protected]
Phone Number: 022-26449628
