The Securities and Exchange Board of India (Sebi) is set to establish a dedicated working group to conduct a comprehensive review of the non-agricultural commodity derivatives market. This announcement was made by Sebi chairman Tuhin Kanta Pandey on Saturday, signaling a significant step towards refining this rapidly growing segment of India's financial ecosystem.
Focus on Market Optimization and Growth
Pandey highlighted that the market regulator has already constituted expert groups focused on agricultural commodities. These groups are examining ways to optimize the regulatory framework governing margins, position limits, and delivery and settlement mechanisms. The goal is to enhance efficiency while steadfastly maintaining market integrity. Pandey stated that their recommendations will guide necessary developmental measures after thorough consultations with all stakeholders.
This initiative comes at a pivotal time for India's commodity derivatives market, which is experiencing explosive growth. Under Sebi's oversight since 2015, the market now encompasses 104 notified commodities and variants, with 34 unique commodities actively traded. The scale of expansion is underscored by the annual notional turnover, which reached ₹580 trillion in FY25, nearly doubling from the previous year. As of October 31, 2025, the turnover has already surged past ₹628 trillion, highlighting its critical role in price discovery and risk management for the economy.
Boosting Institutional Participation and Resolving Key Hurdles
In a major move to deepen market liquidity, Sebi is in active discussions with the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI). The objective is to pave the way for banks and insurance companies to participate in commodity derivatives. Pandey emphasized that enhanced institutional involvement will bring higher liquidity, making the market more effective and attractive for hedging purposes.
Simultaneously, the regulator is engaging with the central government to address Goods and Services Tax (GST)-related issues that hinder participants who wish to take or give physical delivery of commodities through exchange platforms. Resolving these tax hurdles is deemed critical for strengthening the vital link between derivatives markets and the underlying physical trade.
Streamlining Compliance and Investor Protection
On the compliance front, Sebi has rolled out the Samuhik Prativedan Manch, a common reporting portal designed to simplify reporting requirements for stockbrokers. A facility to extend this portal to commodity-only brokers is currently under development. Pandey noted this is part of a broader effort to improve the ease of doing business and compliance across all market segments.
Furthermore, Sebi is examining a proposal to rationalize investor protection mechanisms at exchanges. Currently, separate investor protection funds exist for equity-related products and for commodities. The regulator is considering whether a single, unified investor protection fund for all products offered by an exchange could be a more efficient model, while continuing to robustly safeguard investor interests.
Concluding his remarks, Pandey stressed the indispensable role of robust commodity derivatives markets in price discovery and risk management, especially in today's volatile global landscape marked by geopolitical tensions and climate-related shocks. The ultimate objective, he affirmed, is to build markets defined not just by impressive trading volumes, but by the tangible value they create for the broader Indian economy.
