Sebi reviews volatility scan range for option contracts in commodity derivatives

PTI | New Delhi | Updated: 11-01-2021 21:54 IST | Created: 11-01-2021 21:51 IST
Sebi reviews volatility scan range for option contracts in commodity derivatives
Representative image Image Credit: ANI

Markets regulator Sebi on Monday reviewed scan range on volatility for option contracts in commodity derivatives segment amid higher market volatility.

In light of the increased market volatility in the recent past, the adequacy of current volatility scan range (VSR) values used by clearing corporations in their margin framework was examined, Sebi said in a circular.

This was done in the context of CPSS-IOSCO (the Committee on Payment and Settlement Systems and International Organization of Securities Commissions) prescription for margin models, which limits the need for destabilising and pro-cyclical changes.

Now, Sebi, in consultation with clearing corporations, has decided to prescribe minimum VSR values for underlying commodities based on their volatility -- high, medium and low, the circular noted.

In market parlance, the volatility scan range refers to a range within which the implied volatility might reasonably be expected to move in one day.

For low volatility commodities, Sebi has prescribed a minimum VSR of 4 per cent for non-agricultural goods and 5 per cent for agricultural goods. This is 5 per cent and 6 per cent for non-agricultural goods and agricultural goods, respectively, in the medium category.

In the high volatility commodities category, the regulator has prescribed minimum VSR of 6 per cent and 7 per cent for non-agricultural goods and agricultural goods, respectively.

Clearing corporations, providing clearing and settlement for options, will have to review the value of VSR by backtesting on a monthly basis using last three years' data by 15th of every month and any change in VSR need to be implemented from the 1st trading day of the following month, Sebi said.

The backtesting needs to be done by using appropriate models to extract volatility over the relevant margin period of risk period, it added.

The new framework would be effective from the first trading day of the month of April 1, 2021, Securities and Exchange Board of India (Sebi) said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)


TRENDING

OPINION / BLOG / INTERVIEW

Addressing conflict-related sexual violence at long last

... ...

Why unequal access to coronavirus vaccines is a threat to us all

... ...

India’s love affair with fossil fuels: the path to sustainable development?

... ...

Videos

Latest News

Jharkhand devising resource generation plan after 'unconstitutional harassment' by Centre: CM Soren

Alleging unconstitutional harassment by the Centre over funds, Jharkhand Chief Minister Hemant Soren said pushed to the brink, the state is now devising its own innovative resource generation mechanism for self-sustenance.Alleging unequal t...

IT Dept claims Rs 1,000-crore black income after raids on TN jewellery, bullion group

The Income Tax Department has detected undisclosed income of over Rs 1,000 crore after it raided a leading bullion trader and south Indias biggest jewellery retailer based in election-bound Tamil Nadu, the CBDT claimed on Sunday.It did not ...

Car, gelatin sticks found near Ambani's house sent for forensic test

Mumbai Police have sent for forensic analysis the car and gelatin sticks found in it near industrialist Mukesh Ambanis residence here last month, officials said on Sunday.The Forensic Science Laboratory FSL at Kalina in Mumbai will check th...

Australian Rules-Hall of Famer Hunter to donate brain for concussion research

Former Australian Rules player Ken Hunter has said he would donate his brain to science, answering a call to players for help with medical research into chronic traumatic encephalopathy CTE and other neurodegenerative diseases. A Melbourne ...

Give Feedback