SEBI working group begins review of position limits on non-agri commodity derivatives

A working group constituted by the Securities and Exchange Board of India (SEBI) on ease of doing business in the non-agricultural commodity derivatives segment held its first meeting last week on Thursday, taking up a review of position limits and the frequency of Product Advisory Committee (PAC) meetings at exchanges.

The group includes members from the Commodity & Capital Participants Association of India, exchange and SEBI officials.

“The existing limits were put back in 2016, and since then the market has grown in volume, pricing and investor interest. Increasing the limits will help deepen the non-agri commodity market further, but many factors need to be considered,” one of the persons said.

Chairman Tuhin Kanta Pandey had said last year in December that the regulator would set up a working group to examine operational and regulatory issues in commodity derivatives and suggest measures to deepen the market and ease compliance requirements.

Position limits

The first agenda item is to review and ease position limits, which are caps on the number of contracts that a client or trading member can hold in a commodity derivative. Currently for any non-agricultural commodity, a client’s open position, long and short netted across all contracts in that commodity, cannot exceed the numerical position limit specified by SEBI in its table or 5 percent of the total market-wide open interest (MWOI) in that commodity, whichever is higher.

For trading members and brokers, the open position limit is the higher of: 10 times the numerical client position limit, or 20 percent of the market-wide open interest in that commodity. If the market is deeper and has larger open interest, the 5 percent of MWOI rule may give a larger limit than the fixed numerical value; for a trading member, 20 percent of MWOI can similarly be higher than 10× the client limit.

It may take a few more meetings for the committee to finalise on the increase in cap to be recommended to the regulator. Upon further review internally, SEBI may consider changes to the relevant provisions in its commodity derivatives framework through a consultation paper.

PAC meets

The second issue concerns the mandated frequency of meetings of Product Advisory Committees (PACs) at exchanges.

Under current SEBI norms, PACs — which comprise representatives from industry and trade bodies and advise on contract specifications and product-related matters — are required to meet at least twice a year for commodity groups.

At Thursday’s meeting, members discussed a proposal to mandate one PAC meeting annually, while allowing exchanges to convene additional meetings, if required. The idea is to provide flexibility without diluting oversight, said another source.

The deliberations are expected to particularly benefit the Multi Commodity Exchange of India (MCX), which accounts for the bulk of trading in non-agricultural commodity derivatives such as metals and energy. MCX will be making a detailed presentation at the meeting next week to assist discussions on increasing the position limits.

Emailed queries sent to SEBI did not elicit a response.

Published on February 15, 2026