The Securities and Exchange Board of India (SEBI) announced a comprehensive revision of regulations governing exchange-traded derivatives, particularly in the commodity sector, with an objective of simplifying compliance and reducing redundancy for exchanges and clearing corporations.
SEBI aims to consolidate various provisions from existing master circulars, eliminate outdated norms, and streamline operational requirements for market infrastructure institutions (MIIs). The regulator emphasized that these changes are intended to simplify regulatory requirements, remove unnecessary provisions, discontinue duplication, and enhance the ease of doing business while lessening the compliance burden on exchanges.
A significant proposal includes the elimination of the “Close to the Money” (CTM) option series mechanism for options in commodity derivatives, aligning with practices observed in global commodity exchanges. SEBI stated that this concept complicates exercise mechanisms for participants and creates uncertainty for option sellers.
Additionally, SEBI has proposed reducing the mandatory frequency of Product Advisory Committee (PAC) meetings for non-agricultural commodity derivatives from two annually to one. This adjustment aims to align with similar norms for agricultural commodities, as exchanges suggested that contract specifications for non-agricultural commodities generally require few modifications, and attendance at these meetings has been low.
The regulator has also suggested easing the requirement for balanced representation in the PAC, which comprises members from the Commodity & Capital Participants Association of India, exchanges, and SEBI officials. A previous report by Businessline noted that a working group was evaluating measures to enhance the ease of doing business in the non-agricultural commodity derivatives sector.
Public feedback on the consultation paper has been invited until June 4.
Another proposal involves advancing the expiry dates of commodity derivative contracts in cases where physical markets close unexpectedly due to events like strikes, festivals, or adverse weather. SEBI noted that notifying trade participants about such changes would require appropriate advance notice, stating that it is impractical to seek PAC approval to advance a contract’s expiry and provide a 10-day notice under unexpected circumstances.
SEBI may also allow exchanges to delegate the monitoring of position limits to clearing corporations through formal agreements that clarify roles and responsibilities. Currently, different exchanges adopt varying practices in this regard across products and client categories.
In addition, SEBI has proposed removing several outdated provisions, highlighting that requirements related to brokers without nationwide trading terminals have become obsolete with the closure of regional exchanges and the rise of internet-based trading.
The regulator has suggested the elimination of separate certification guidelines for derivatives market participants, as these are already covered under SEBI’s existing certification regulations for associated persons in the securities market.
Furthermore, SEBI plans to transition from newspaper disclosures of derivatives transactions to website-based disclosures by exchanges, reflecting the greater accessibility of information online.
Lastly, the regulator intends to distinguish regulatory provisions applicable to exchanges and clearing corporations into separate master circulars, considering the increasingly independent functions of clearing corporations following interoperability and distinct clearing member registrations.
Published on May 14, 2026.
