The Securities and Exchange Board of India vide its notification dated 21st July 2020 has reviewed stress testing methodology for commodity derivatives to address the concern regarding high-stress loss figures on positions with early pay-in.
In order to address the concern regarding high-stress loss figures on positions with early pay-in, the following clause stands inserted at end of Part-B in its earlier circular dated 11th July 2020 relating to standardized stress testing of credit risk for commodity derivatives.
While calculating the residual losses as per ‘d’ and ‘f’ above, for positions on which early pay-in are given by the clients/brokers, and margin exemption are granted on such positions, CCs are permitted to consider the ‘margin exemption granted’ or ‘value of early paid-in goods’, whichever is lower, as ‘margins supporting those positions .
Click here to read the notification.
