SEBI Considers Relaxing SGF Norms for Commodity Derivatives

The Securities and Exchange Board of India has floated multiple proposals and regulatory changes covering commodity derivatives risk norms, pledge invocation rules, margin benefits and investment flexibility for REITs and InvITs, aimed at improving market efficiency and ease of doing business. 

Commodity Derivatives Risk Norms Under Review 

The regulator has suggested lowering the stress-testing Z-score threshold for commodity derivatives clearing corporations from 10 to 5, arguing that the revised level would still capture extreme but plausible market moves while reducing excessive capital and margin burdens.  

It has also proposed revising settlement guarantee fund coverage to focus on simultaneous default of the top three clearing members with the highest exposure, instead of linking it to half the exposure from all members’ potential defaults. 

New Safeguards for Pledged Shares 

In a separate move, SEBI has tightened the operational framework around pledging of securities through the depository system. Lenders invoking pledged shares will now be required to give shareholders reasonable prior notice before sale.  

The change is designed to strengthen investor protection and ensure that enforcement actions follow fair-notice principles embedded in lending agreements. 

Expiry-Day Margin Benefit Removed for Stock Derivatives 

SEBI has also withdrawn calendar spread margin benefits for single-stock derivative contracts on their expiry day.  

This brings stock derivatives in line with index derivatives, where expiry-day offset margin advantages are already not permitted. Positions across other expiries will continue to receive normal spread margin treatment. 

Operational Flexibility Proposed for REITs And InvITs 

The regulator has further proposed easing certain operational and investment norms for real estate and infrastructure investment trusts. 

The proposals include allowing InvITs to continue holding special purpose vehicles even after concession periods end, subject to disclosures and conditions, and widening the scope for REITs and InvITs to invest in liquid mutual fund schemes. The changes are based on industry feedback highlighting practical operational constraints. 

Read More: SEBI Proposes Easier Exit Rules For AIFs Stuck In Tax And Legal Disputes! 

Conclusion 

Taken together, the proposals signal a calibrated shift toward risk-aligned regulation easing capital strain where norms are seen as overly conservative while tightening investor safeguards and improving operational flexibility across market structures. 

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