MUMBAI, 10 March 2026: India’s market regulator, the Securities and Exchange Board of India (Sebi), is planning a major review of the commodity derivatives framework to improve market participation and strengthen price discovery.
The proposed reforms include revising agricultural commodity classifications, modifying market-wide and member-level position limits, and reviewing margin frameworks. The regulator is also considering lifting the long-standing trading ban on seven key agricultural commodities.
Possible End to Trading Ban on Key Crops
The review could pave the way for resuming futures trading in commodities such as:
- wheat
- chana
- mustard seeds
- soybean
- moong
- non-basmati paddy
- crude palm oil
Trading in these commodities was suspended in December 2021 to curb price volatility and inflation. The ban has been extended annually and currently runs until March 2026.
However, market participants have argued that the restrictions significantly reduced trading volumes and weakened the futures market’s role in hedging and price discovery for farmers and traders.
Review of Commodity Classification and Limits
Sebi is also examining how agricultural commodities are classified, as the current classification system directly affects position limits for traders. The review aims to simplify compliance and reduce accidental breaches of trading limits that have frequently affected market participants.
Additionally, the regulator is evaluating margin requirements and penalty structures related to position limit violations, with the goal of creating a fairer and more participation-friendly trading environment.
Push for Institutional Participation
The initiative forms part of a broader strategy to strengthen India’s commodity derivatives ecosystem and attract more institutional capital.
Tuhin Kanta Pandey, Chairman of Sebi, has emphasised the need to deepen institutional participation in commodity markets to improve liquidity and help India move closer to becoming a global price setter rather than a price taker.
India’s commodity derivatives market has expanded significantly in recent years. The notional turnover of the segment reached approximately ₹580 trillion in FY25, nearly doubling from the previous year.
Aligning with Global Markets
Since the commodity derivatives market came under Sebi’s regulatory oversight in 2015, the regulator has introduced several reforms. Institutional investors such as mutual funds and portfolio managers were allowed to participate in 2019, while foreign portfolio investors have recently gained access to exchange-traded commodity derivatives in select segments.
Further reforms could align India’s commodity markets more closely with global trading hubs and improve the efficiency of price discovery.
Challenges and Market Concerns
Despite the proposed reforms, concerns remain over regulatory uncertainty. Market experts say repeated bans and strict position limits have historically reduced liquidity and discouraged participation in commodity futures.
The earlier suspension of seven major agri-commodities, which accounted for a large share of trading volumes on exchanges such as National Commodity and Derivatives Exchange, led to a sharp drop in turnover.
Analysts believe the success of Sebi’s reforms will depend on clear implementation, stable regulatory policies and improved market infrastructure.
What Happens Next
Sebi is expected to release a consultation paper outlining the proposed changes, followed by industry consultations and public feedback before final approval.
If implemented effectively, the reforms could strengthen India’s commodity derivatives ecosystem, improve risk management tools for farmers and traders, and enhance the country’s role in global commodity price discovery.
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