India’s markets regulator, the Securities and Exchange Board of India (SEBI), is considering easing position limits for non-agricultural commodity derivatives and changing settlement rules for some farm contracts to deepen trading and attract genuine hedgers. Chairman Tuhin Kanta Pandey said the goal is to boost liquidity and market depth without weakening risk controls. The proposed changes aim to broaden participation in India’s fast-growing commodity derivatives market and improve its effectiveness in managing price risks.
SEBI is also preparing guidelines to change settlement rules for certain agricultural commodity derivatives after completing consultations, with Pandey suggesting a phased approach to allow contracts to mature before mandatory physical settlement. Notional turnover in futures and options reached about 1,538 trillion rupees ($16 trillion) in the first six months of the financial year beginning April 1, already 11% higher than the entire previous fiscal year. Bullion accounted for roughly 59% of notional turnover in the year ended March.
Pandey emphasized that success must be measured by how effectively markets manage risk, not turnover alone. SEBI continues to discuss GST issues affecting commodity delivery via exchanges and is examining the settlement-price framework for derivatives on expiry days. It also aims 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 hedgable risks.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing