SEBI Reviews Non-Agricultural Commodity Position Limits to Deepen Trading and Market Liquidity — October 3, 2026

Capital markets regulator Securities and Exchange Board of India (SEBI) is actively evaluating position limits for non-agricultural commodity derivatives contracts to enhance market depth and boost trading liquidity while maintaining strict risk management protocols.

Speaking at the 12th International Convention of the Commodity and Capital Market Participants Association of India (CPAI) in New Delhi, SEBI Chairman Tuhin Kanta Pandey announced that the regulator is reviewing constraints governing non-agri segments, including energy, bullion, and base metals.

The regulatory assessment follows a series of market reforms aimed at modernising India's commodity derivatives space. In September 2026, SEBI overhauled client-level position limits in agricultural commodities, raising limits to 2% of deliverable supply for broad commodities and instituting monetary caps on breach penalties. The ongoing review for non-agricultural commodities is intended to provide commercial hedgers, institutional participants, and domestic traders with greater flexibility.

Key Focus Areas Outlined by SEBI:

• Easing Position Thresholds: Assessing prevailing numeric and open interest ceilings in non-agri contracts—such as crude oil, natural gas, gold, and silver—to accommodate larger order flows from institutional and corporate participants.
• Expanding Institutional Participation: Capitalising on foreign portfolio investor (FPI) access to deepen open interest and improve convergence between domestic and international benchmark pricing.
• Expiry Day Settlement Framework: Examining industry feedback regarding the calculation of derivatives settlement prices on expiry days following the rollout of the Closing Auction Session (CAS) mechanism.
• Physical Delivery and Taxation Friction: Engaging with government authorities on Goods and Services Tax (GST) friction points that complicate physical deliveries on exchange platforms.

Significance for Indian Market Participants

India is one of the world's largest importers and consumers of industrial metals, crude oil, and bullion. Despite high physical consumption, domestic exchange-traded commodity volumes have historically faced limitations due to tight participant-level caps, prompting large corporate hedgers and proprietary desks to deploy capital on overseas bourses like CME and LME.

Expanding position limits on domestic exchanges like Multi Commodity Exchange of India (MCX) is expected to curtail liquidity leakage, lower impact costs, and provide deeper order books. A more accommodating limit structure, paired with FPI entry into non-agricultural derivatives, enables financial institutions and corporate treasuries to execute effective hedge ratios within onshore markets.

SEBI affirmed that any adjustments to contract exposure limits will be accompanied by robust surveillance and margining architectures to pre-empt speculative concentration and maintain systemic stability.

Tags: SEBI MCX CPAI Commodity Derivatives Crude Oil Gold