Mumbai, Aug 12: The Securities and Exchange Board of India (SEBI) has proposed opening up greater opportunities for foreign portfolio investors (FPIs) to participate in non-agricultural commodity derivative contracts that are physically settled on domestic exchanges.
The proposal is aimed at widening the participation of FPIs in India’s commodity derivatives market and creating greater depth and liquidity in the segment.
Under the proposed framework, eligible FPIs would be able to take part in physically settled non-agricultural commodity derivative contracts, subject to the applicable regulatory requirements and safeguards.
The move could bring a wider range of institutional participants into the commodity market and strengthen the role of exchanges in facilitating price discovery and risk management.
For businesses that depend on commodities, an active and liquid derivatives market can provide useful tools to manage price fluctuations. Greater participation can also help improve trading activity and make the market more responsive to changing domestic and global conditions.
The proposal comes as SEBI continues to explore ways to develop India’s commodity derivatives ecosystem and make it more efficient and accessible while maintaining appropriate investor protection and risk-management standards.
Allowing greater FPI participation could also help connect India’s commodity markets more closely with global investment flows, while keeping trading within the regulatory framework governing domestic exchanges.
The proposed changes underline SEBI’s broader effort to deepen India’s financial markets and build a commodity derivatives ecosystem that can better serve producers, businesses, investors and other market participants.
As the consultation and regulatory process progresses, the focus will remain on ensuring that increased participation is supported by strong safeguards, transparent trading practices and effective risk management.
