16 hrs ago
SEBI May Open Commodity Derivatives To Foreign Portfolio Investors
India’s market regulator may let foreign investment funds trade some commodity contracts.
The proposed contracts would not involve agricultural goods and would not be settled with cash.
The funds would still need to follow existing safety and risk rules.
SEBI asked for public feedback before making the decision.
That feedback period ended on September 1.
The regulator may issue a final circular without getting separate board approval.
SEBI is also checking how prices are set when some derivatives are settled.
This review follows concerns about a new closing auction system used for market prices.
SEBI may allow foreign portfolio investors to trade select Indian commodity derivatives from September.
The proposed framework covers non-cash-settled, non-agricultural commodity derivative contracts.
SEBI’s consultation on FPI participation ran from August 12 to September 1.
The move could increase participation, liquidity and institutional investment in commodity markets.
SEBI is also reviewing derivative settlement prices following concerns about the Closing Auction Session.
- Who
- The Securities and Exchange Board of India and foreign portfolio investors.
- What
- SEBI is considering allowing FPIs to trade eligible commodity derivative contracts and is reviewing derivative settlement-price rules.
- Where
- India’s commodity derivatives and equity cash markets.
- When
- The proposed FPI access could begin in September; SEBI’s consultation ran from August 12 to September 1, while the Closing Auction Session began on August 3, 2026.
- Why
- The proposed access is intended to broaden participation, improve liquidity and strengthen the derivatives market; the settlement review responds to stakeholder concerns.
Broader Market Access
Risk And Settlement Caution
Foreign participation
Broader Market Access
Allowing FPIs into eligible commodity derivatives could increase market participation, liquidity and institutional investment.
Risk And Settlement Caution
Participation would remain limited to approved contracts and subject to existing regulatory and risk-management requirements.
Settlement methodology
Broader Market Access
Using the Closing Auction Session’s closing price provides an official basis for settling derivative contracts on expiry.
Risk And Settlement Caution
Stakeholders have raised concerns about using CAS-based closing prices, prompting SEBI to consider changes after reviewing initial implementation.
Key facts
- Regulator
- Securities and Exchange Board of India (SEBI)
- Potential participants
- Foreign portfolio investors (FPIs)
- Eligible contracts
- Non-cash-settled, non-agricultural commodity derivative contracts
- Consultation period
- August 12 to September 1
- Possible approval route
- SEBI may issue a circular without requiring board approval
- Settlement review
- SEBI is examining the use of Closing Auction Session prices for derivative settlement
- Expected next step
- A discussion paper on possible settlement-method changes is expected within a week
Sources
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