The Securities and Exchange Board of India (Sebi) is looking to streamline position-limit and margin frameworks in commodity derivatives to reduce avoidable costs for market participants while retaining risk controls, Chairman Tuhin Kanta Pandey said on Wednesday.
The markets regulator will also continue discussions with the Goods and Services Tax (GST) Council on issues affecting participants seeking to give or receive commodities through the exchange mechanism.
“The next stage” of India’s commodity derivatives market should focus on utility rather than turnover alone, Pandey said at the inaugural MCX Global Commodity Conclave.
The consultation on position limits for agricultural commodities has been completed and guidelines will be issued shortly, Pandey said. He added that Sebi was reviewing its margin framework as part of efforts to make participation easier and more efficient.
Sebi has also completed consultations on several ease-of-doing-business measures as part of its review of the master circulars governing market infrastructure institutions (MIIs).
These include having a single Investor Protection Fund at the exchange level, incentivising farmers and farmer producer organisations (FPOs) to participate in options on futures, simplifying Options in Goods by removing the Close-to-the-Money framework, and extending direct market access to all investor categories for exchange-traded commodity derivatives.
The regulator is also examining wider participation in the commodity derivatives market. Sebi is considering broader foreign portfolio investor (FPI) access to commodity indices and physically settled non-agricultural contracts through a calibrated framework.
Pandey said India’s commodity derivatives market had grown rapidly, with futures turnover rising 133 per cent to Rs 166.4 trillion in 2025-26. Options premium turnover more than doubled to Rs 16.8 trillion during the year.
In the first four months of 2026-27, turnover had already reached about 65 per cent of the previous financial year’s turnover.
Sebi has also been working to improve capital efficiency in the segment. The regulator has reviewed the Settlement Guarantee Fund framework while retaining safeguards and extended the benefit of early pay-in to option contracts, which helps release capital and lower participation costs.
The regulator is also seeking to strengthen the link between derivatives and physical markets. It has completed consultations on a phased physical-settlement architecture for agricultural commodities, with the objective of allowing liquidity to develop alongside the delivery ecosystem.
Pandey said warehousing, assaying, quality standards and credible delivery systems would be essential for effective convergence between derivatives and physical markets.
Sebi has created a dedicated vertical within its Market Regulation Department for commodity derivatives. The move, Pandey said, would bring greater specialisation, closer engagement with the market and sharper regulatory focus to the segment.
