Sebi tweaks SGF rules to ease compliance

New Delhi: Markets regulator Sebi revised the rules governing the Settlement Guarantee Fund (SGF) for the commodity derivatives segment to ease compliance for clearing corporations.

Under the revised framework, clearing corporations will now calculate the SGF coverage based on the simultaneous default of at least three clearing members (and their associates) that would create the highest credit exposure in stress scenarios.

“Clearing Corporations shall calculate the credit exposure due to simultaneous default of at least 3 clearing members (and their associates) causing the highest credit exposure,” Sebi said in its circular. Earlier, clearing corporations were required to calculate SGF coverage based on the simultaneous default of at least two clearing members, causing the highest credit exposure, along with 50 per cent of the exposure arising from the default of all clearing members.

In addition, Sebi said it can grant exemptions or relaxations from strict SGF requirements on a case-by-case basis.

Such exemptions may be considered after taking into account the prevailing market conditions, the adequacy of applicable risk management framework and keeping in view the overall objective of investor protection, it added.