Sebi looks to ease position-limit, margin norms in commodity markets

The regulator is also considering wider FPI access, simpler settlement rules and lower participation costs while retaining safeguards in the commodity derivatives market

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 chairman added.

 

“The next stage of India’s commodity derivatives market should be defined not by turnover alone, but by utility — how effectively these markets help the real economy discover prices and manage risk,” 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.

 

The chairman further added that 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.

 

“We have sent proposals to the GST Council secretariat that when there is a delivery in the commodity market, warehousing can happen anywhere. So, instead of separate registration in all states, it can be brought on an integrated GST (IGST) model rather than state GST (SGST) model. We will be engaging further with the GST Council which includes the states and Centre. We will be engaging with the exchanges also to come up with practical solutions,” said the chairman.

 

Several market participants and intermediaries have earlier made representations to the market regulator on the issues around GST.

 

 Under the current practice, exchange-related deliveries may require the intermediaries to obtain separate GST registrations in every state where a delivery centre is located, even though the transaction is executed and settled through the centratlised mechanism of exchanges.

 

Experts said this can lead to separate state-wise filings, multiple registrations, reconciliation challenges, and increased operational costs.

 

They add that treating such deliveries under IGST as inter-state supplies could allow seamless tax credit flow and centralised compliance ensuring tax allocation to destination states through the existing mechanism.

 

A day earlier, the regulator floated a consultation paper for wider participation of foreign portfolio investors (FPIs) in commodity indices and physically settled non-agricultural contracts through a calibrated framework.

 

“A deeper mix of commercial and institutional participants will strengthen liquidity, price discovery and the effectiveness of hedging,” he noted.

 

Pandey said India’s commodity derivatives market had grown rapidly, with futures turnover rising 133 per cent to ₹166.4 trillion in 2025-26. Options premium turnover more than doubled to ₹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.

 

“India is a major producer and consumer of several commodities. Can that economic weight translate into greater influence over price discovery? Can we move from being price takers to becoming price makers?” noted Pandey.

 

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.

 

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. 

In the pipeline 

• Guidelines are expected shortly on agricultural commodity position limits 
• Sebi, GST Council and exchanges working on key GST issues
• IGST model may ease physical delivery compliance 
• Sebi reviewing margins to widen commodity market participation
• Measures discussed to boost FPI access and simplify options