SEBI Cuts Commodity Derivatives Stress Test Threshold to 5

SEBI is like a referee for India's financial markets, making sure they run safely.

Companies that trade commodities, like gold, oil, or wheat, have to follow special rules.

One rule is called a stress test, which is like a pretend game of 'what if prices jump wildly?'

The Z-score is a measuring stick that shows how far a price move is from what usually happens.

Before, the stress test included very extreme price jumps equal to a score of 10.

Now the referee has lowered that to 5, meaning the test uses smaller extreme jumps.

This does not mean prices can only move 5 percent — prices can still jump more in real life.

It just means the test no longer counts the most enormous historical shocks.

Because the test is less scary, companies may not need to keep as much safety money set aside.

The money they save can be used for other things while still keeping the market well protected, since a score of 5 still covers more than 99.9999 percent of normal market conditions.