India’s markets regulator is considering easing position limits for non-agricultural commodity derivatives and changing settlement rules for some farm contracts to deepen trading and attract more genuine hedgers. SEBI Chairman Tuhin Kanta Pandey said the proposed changes aim to boost liquidity and market depth without weakening risk controls. The measures come as trading in India’s commodity derivatives market surges, with notional turnover in futures and options reaching about 1,538 trillion rupees ($16 trillion) in the first six months of the financial year that began April 1, already 11% higher than in the whole of the previous fiscal year.
Bullion accounted for about 59% of notional turnover in the year ended March. Pandey emphasized that success must be measured not by turnover alone, but by how effectively these markets help manage risk. SEBI is also preparing guidelines to change settlement rules for some agricultural commodity derivatives after completing consultations on the proposal, advocating a phased approach to allow contracts to mature before physical settlement becomes mandatory.
The regulator is separately examining concerns over the settlement-price framework for derivatives on expiry days and wants to deepen cash markets through wider participation, stronger securities borrowing and lending, and more efficient hedging and arbitrage. SEBI has already widened foreign investor access to commodity indexes and physically settled non-agricultural contracts, and introduced electricity futures and weather derivatives to expand the range of risks that can be hedged.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing