Sebi reviews position limits for commodity contracts to enhance market depth

The Securities and Exchange Board of India (Sebi) is reassessing position limits applicable to non-agricultural commodity contracts as part of efforts to enhance market liquidity and depth without compromising risk management controls, according to Sebi Chairman Tuhin Kanta Pandey.

Addressing market participants on Saturday, Pandey outlined the regulator's vision for modernising the commodity derivatives sector. He noted that market architecture should facilitate contracts in achieving adequate scale and maturity. For certain agricultural commodities, mandatory physical settlement from inception can constrain market development, warranting a phased transition approach that allows contracts to establish themselves before physical delivery becomes compulsory.

Sebi has concluded stakeholder consultations on these proposals, with formal guidelines expected to follow shortly. The regulator is simultaneously pursuing structural reforms to reduce friction points affecting commodity market participants, including discussions with government agencies on GST-related issues that impact entities transacting physical commodities through exchange platforms.

Pandey emphasised that technological infrastructure should be tailored to serve the distinct requirements of commodity markets, which encompass a diverse ecosystem of producers, commercial end-users, farmers, processors and physical traders. These reforms reflect Sebi's broader push to develop a more competitive and efficient commodity derivatives market aligned with India's economic needs.