MANU/SDER/0013/2020

Ministry : Securities and Exchange Board of India

Department/Board : Commodity Derivatives Market Regulation Department

Circular No. : SEBI/HO/CDMRD/DRMP/CIR/P/2020/244

Date : 21.12.2020

Notification/ Circulars Referred : Circular SEBI/HO/CDMRD/DRMP/CIR/P/2018/111 dated July 11, 2018 MANU/SDER/0013/2018;SEBI/HO/CDMRD/DRMP/CIR/P/2020/128 dated July 21, 2020 MANU/SDER/0010/2020;Circular SEBI/HO/CDMRD/DRMP/CIR/P/2020/176 dated September 21, 2020 MANU/SDER/0011/2020

Citing Reference:
Circular SEBI/HO/CDMRD/DRMP/CIR/P/2018/111 dated July 11, 2018 MANU/SDER/0013/2018  Referred

SEBI/HO/CDMRD/DRMP/CIR/P/2020/128 dated July 21, 2020 MANU/SDER/0010/2020  Referred

Circular SEBI/HO/CDMRD/DRMP/CIR/P/2020/176 dated September 21, 2020 MANU/SDER/0011/2020  Referred

To,

The Managing Directors/Chief Executive Officers,
All Clearing Corporations having Commodity Derivatives Segment

Sir/Madam,

Review of inclusion of Historical Scenarios in Stress Testing in Commodity Derivatives Segment

1. SEBI vide Circular SEBI/HO/CDMRD/DRMP/CIR/P/2018/111 dated July 11, 2018 and SEBI/HO/CDMRD/DRMP/CIR/P/2020/128 dated July 21, 2020, inter alia, had prescribed norms related to Stress Testing for the commodity derivatives segment, which included norms regarding historical scenarios.

2. In light of an unprecedented event of negative final settlement price in the crude oil futures markets in the recent past, SEBI vide circular SEBI/HO/CDMRD/DRMP/CIR/P/2020/176 dated September 21, 2020 had prescribed an Alternate Risk Management Framework that would be applicable in case of near zero and/or negative prices for any underlying commodities/futures.