SEBI Revises SGF Norms | 3 Clearing Members Default Test

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  • Last Updated on 18 March, 2026

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SEBI SGF norms

Circular No. HO/47/16/14(1)2026-MRD-POD1/I/7115/2026; Dated: 16.03.2026

1. Background and Context

The Securities and Exchange Board of India (SEBI) has revised the coverage norms applicable to the Core Settlement Guarantee Fund (SGF) under the Commodity Derivatives segment. These revisions are aimed at strengthening the risk management framework governing Clearing Corporations and enhancing the resilience of the settlement ecosystem against member defaults.

2. Revised Coverage Norms for Core SGF

2.1 Revised Default Scenario for Credit Exposure Computation

Clearing Corporations are now required to compute their credit exposure based on the simultaneous default of at least 3 clearing members. This replaces the earlier methodology, which was based on the default of 2 clearing members plus 50% of all clearing members.

2.2 Significance of the Revision

The upward revision in the number of simultaneous defaults to be considered strengthens the stress-testing framework by:

  • Accounting for a broader and more severe default scenario.
  • Ensuring that the Core SGF corpus is adequately funded to withstand systemic shocks.
  • Aligning the commodity derivatives segment’s risk coverage with more robust prudential standards.

3. Exemptions and Relaxations from SGF Provisions

3.1 Power to Grant Exemptions

SEBI may, after due deliberation, grant exemptions or relaxations from the strict enforcement of provisions relating to the Settlement Guarantee Fund (SGF) in the commodity derivatives segment. Such exemptions shall be considered on a case-to-case basis.

3.2 Factors to be Considered

Before granting any exemption or relaxation, SEBI shall take into account the following:

  • Prevailing Market Conditions – the broader economic and market environment at the time of the request.
  • Adequacy of the Applicable Risk Management Framework – whether the existing safeguards are sufficient to compensate for any deviation from standard SGF norms.
  • Overall Objective of Investor Protection – ensuring that any relaxation does not compromise the safety and integrity of the settlement system or the interests of investors.

3.3 Nature of Exemptions

The exemption mechanism is discretionary and deliberative in nature, ensuring that no blanket relaxations are granted. Each case will be assessed independently against the above parameters, preserving regulatory flexibility while maintaining systemic safeguards.

4. Effective Date

The circular shall come into force with immediate effect from the date of its issuance.

Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied