Sebi mulls allowing FPIs in non-cash, non-agri commodity derivatives
Mumbai, Sep 17, 2025
Mulls allowing FPI participation in non-cash, non agri commodity derivatives
In a bid to deepen institutional participation and boost liquidity in the commodities market, the Securities and Exchange Board of India (Sebi) is considering allowing foreign portfolio investors (FPIs) to trade in select commodity derivatives for hedging.
The regulator is also exploring measures to bring banks, insurers, and pension funds into the segment.
Sebi Chairman Tuhin Kanta Pandey on Wednesday said that a proposal to permit FPIs in non-cash-settled and non-agricultural commodity derivative contracts is under active consideration.
“Enhanced institutional participation will bring in higher liquidity, making the market more attractive for hedging. We will keep working towards a regulatory framework to enable prudent institutional access to these markets,” said Pandey at a conference by Multi-Commodity Exchange (MCX) on Metals — From Mines to Markets.
Shares of MCX ended 3.6 per cent higher at ₹7,924 on Wednesday.
Industry experts said Sebi’s proposal will help expand hedging options beyond crude oil and natural gas, potentially improving liquidity in contracts such as gold and silver.
The regulator is also engaging with the government to address goods and services tax (GST)-related hurdles faced by entities wishing to take or give delivery of commodities on exchange platforms. Additionally, by December 2025, commodity-specific brokers will be brought under the common reporting framework for compliance.
To further expand the market, Sebi has set up a committee to recommend steps for deepening agricultural commodities trading while a separate working group is being considered for the development of non-agri commodities such as metals.
“We need to rapidly move from being price takers to price setters… We are building an ecosystem that is resilient to global shocks and responsive to domestic needs,” said the Sebi chief.
Amid global concerns on rare earth minerals and tariff, the Sebi chairman called for self-reliance and a robust derivatives market to protect participants through hedging.
“The recent doubling of tariffs on aluminium and copper imports by the US, for instance, is a development that directly affects India's export landscape. In such a volatile environment, the robust derivatives market provides a powerful shield, allowing Indian producers and consumers to hedge against global price shocks,” said Pandey.
He also stressed the need to secure critical minerals like lithium, cobalt, nickel, and rare earth elements — resources he described as the building blocks of a green energy future.
While pushing for greater self-reliance, Pandey reaffirmed that safeguards such as real-time margin collection and continuous monitoring remain non-negotiable.
Separately, the Association of Mutual Funds in India (Amfi) has suggested measures to Sebi to help position metals as an investment asset class.
[The Business Standard]
