Sebi Cuts Z-score Threshold for Commodity Derivatives from 10 to 5

Why in news

Sebi revised the Z-score threshold for stress testing in commodity derivatives to improve the Ease of Doing Business.

Background

The Securities and Exchange Board of India (Sebi) reduced the Z-score threshold from 10 to 5 for the Core Settlement Guarantee Fund (Core SGF) framework. The calculation utilizes the mean and sigma of returns over a Margin Period of Risk across a 15-year period.

Facts for Prelims

• BodySebi: The primary regulator for the securities and commodity derivatives markets in India.
• FactZ-score threshold: Reduced from 10 to 5 for commodity derivatives stress testing.
• FactCore SGF: Uses mean and sigma of returns over a 15-year Margin Period of Risk.

For Mains

Q. Discuss how regulatory reforms in commodity derivatives markets contribute to the 'Ease of Doing Business' and financial market stability in India.

Dimensions to cover in your answer

• market liquidity
• risk mitigation
• regulatory oversight
• Ease of Doing Business

Keywords: Stress Testing · Market Stability · Regulatory Framework · Ease of Doing Business

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