The stress tests would need to be conducted for credit risk, liquidity, adequacy of liquidity arrangements and for back testing for adequacy of margins, among others.

The new regime is aimed at enhancing the robustness of the present risk management system of the clearing corporations to enable them to deal with defaults of the clearing members much more effectively.

Sebi has from time to time put in place various risk containment measures to address the risks involved in the securities market. One such measure prescribed was norms for Settlement Guarantee Fund (SGF) at stock exchanges including corpus, contribution, management, usage and recoupment of the fund corpus.

The new norms are aimed at further strengthening the system to deal with settlement defaults, although there have been very few such cases in recent times, as settlement commitments have mostly been met even in times of freak trades and temporary outages on stock exchange platforms.

Clearing corporations are required to maintain sufficient resources to cover losses due to major defaults in the market so as to avoid any systemic risk.

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