The Securities and Exchange Board of India (SEBI) proposed on Tuesday to increase client-level position limits for agricultural commodity derivatives and to rationalize penalties for breaches of these limits.
Position limits are designed to control the number of contracts a trader can hold in a specific commodity at any given time. These limits aim to reduce excessive speculation and prevent the concentration of positions.
According to SEBI, the current position limits, which were established in 2017, aligned with market conditions at that time. However, the regulator noted a significant evolution in the market’s participant base and product offerings since then, suggesting that higher limits could enhance liquidity, deepen markets, and improve price discovery.
Agricultural commodities are categorized into three groups: broad, narrow, and sensitive. Sensitive commodities are particularly susceptible to government or external interventions, such as stock limits, import-export restrictions, or other trade barriers.
The broad category includes commodities with an average deliverable supply of at least 10 lakh metric tonnes over the previous five years and a minimum monetary value of ₹5,000 crore. Commodities that do not fit either the broad or sensitive classifications are deemed narrow.
SEBI has proposed increasing the overall client-level open position limits for broad agricultural commodities to 2 percent of deliverable supply, up from the current limit of 1 percent. For narrow commodities, the limit would rise to 1 percent from 0.5 percent, while sensitive commodities would see an increase to 0.5 percent from 0.25 percent. These overall client-level open position limits for each commodity are calculated based on its annual deliverable supply.
Additionally, SEBI has suggested revising the definition of the broad category to allow commodities to qualify based on either the quantitative threshold of 10 lakh metric tonnes or the monetary threshold of ₹5,000 crore.
Penalties for violations of up to 2 percent of the limit would apply under the same formula, capped at ₹10,000. For violations exceeding 2 percent, penalties would be calculated based on the formula: excess position multiplied by the closing price, the number of days of violation, and 2 percent, or ₹2 lakh, whichever is lower.
Furthermore, if violations exceeding 2 percent occur more than three times in a month, the concerned member would be placed in a square-off mode for one trading day. Repeated violations beyond three instances within the same month would incur an additional penalty equivalent to the original penalty imposed.
Published on May 12, 2026.
