Sebi may relax norms for select agri commodity F&O contracts

Mumbai: The Securities and Exchange Board of India (Sebi) on Tuesday proposed to allow select agricultural commodity derivatives contracts to begin trading as cash settled instruments before transitioning to mandatory physical settlement.

The regulator said exchanges may be allowed on a pilot basis, to launch or revive delivery-based agricultural contracts that initially operate as financially settled products and later shift to compulsory physical settlement once predefined thresholds such as average daily traded volume, open interest levels, or a two-year period are met. "Liquidity formation in several agricultural contracts remains constrained, especially at the launch or relaunch stage. Low volumes and limited open interest can reduce market confidence, creating a feedback loop that further suppresses participation," Sebi said in a discussion paper.

"Although accredited warehouses and assaying mechanisms have expanded, their utilisation in certain commodities remains limited."


Sebi suggested that on a pilot basis, a couple of commodities could be considered under the proposed framework such as maize, groundnut and chilli.

In a separate development, Sebi has also proposed doubling the client-level open position limits across all categories of agri commodities.