Will SEBI Open Doors for Banks, Insurers, and FPIs in Commodity Derivatives?
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Synopsis
SEBI is taking significant steps to enhance participation in India's commodity derivatives market, aiming to include banks, insurance companies, pension funds, and foreign portfolio investors. This move is expected to attract global investments and make commodity trading more accessible to various institutional investors.
Key Takeaways
- SEBI is consulting the government to expand participation in commodity derivatives.
- Inclusion of banks, insurers, and pension funds can attract global investors.
- SEBI emphasizes the importance of maintaining market integrity through oversight.
- A working group will develop the non-agricultural commodity space, including metals.
- Compliance will be simplified with a unified reporting platform by December 2025.
New Delhi, Sep 17 (NationPress) The Chairman of the Securities and Exchange Board of India (SEBI), Tuhin Kanta Pandey, announced on Wednesday that the regulatory body will engage with the government to enhance the participation in the nation's commodity derivatives market.
At an event hosted by the Multi Commodity Exchange, Pandey indicated that SEBI is considering the inclusion of banks, insurance firms, and pension funds in the commodity derivatives arena.
Moreover, he revealed that SEBI aims to obtain government consent for allowing foreign portfolio investors (FPIs) to engage in trading derivatives linked to non-agricultural and non-cash settled commodities.
This initiative, he stated, will facilitate the integration of international investors into India's commodities marketplace.
Pandey emphasized that SEBI has already established a committee tasked with proposing strategies to strengthen the agricultural commodities sector.
A working group will be convened shortly to expand the non-agricultural commodity domain, particularly in metals.
According to the SEBI chief, the regulatory authority's approach will be comprehensive, with a primary focus on safeguarding the integrity and safety of the markets.
He noted that mechanisms like real-time margin collection and continuous oversight are vital for achieving this.
Simultaneously, Pandey underscored the importance of broadening participation in commodity trading.
He clarified that commodity platforms cater not only to large corporations, importers, and traders but also to institutional investors such as mutual funds and alternative investment funds (AIFs).
These investors are increasingly recognizing metals as a valuable asset class that can enhance risk-adjusted returns.
Increased institutional engagement, as noted by Pandey, will elevate liquidity and enhance the market's relevance for hedging.
To simplify regulatory compliance, SEBI plans to integrate commodity-specific brokers into the Samuhik Prativedan Manch—a unified reporting platform—by December 2025.
This initiative is expected to alleviate reporting burdens for market participants.
SEBI is also collaborating with the government to address GST-related issues faced by investors wishing to transact commodities via exchange platforms.
Additionally, the regulator will launch targeted awareness and educational initiatives to make commodity markets more accessible and pertinent for a broader spectrum of investors and stakeholders.
Point of View
SEBI's initiative to broaden participation in the commodity derivatives market signifies a progressive step towards enhancing market accessibility and integrating global investors. By involving banks, insurers, and FPIs, India can potentially strengthen its commodities sector while ensuring market integrity and safety. This move aligns with national economic growth objectives and fosters a more inclusive trading environment.
NationPress
20/09/2025
Frequently Asked Questions
What is SEBI's plan regarding commodity derivatives?
SEBI plans to consult the government to allow banks, insurers, pension funds, and foreign portfolio investors to participate in India's commodity derivatives market.
How will this impact the commodities market?
The inclusion of these entities is expected to enhance liquidity, attract global investments, and make commodity trading more accessible for various institutional investors.
What measures is SEBI taking to ensure market integrity?
SEBI's strategy includes real-time margin collection and continuous market monitoring to maintain the integrity and safety of the commodities market.
When will the new reporting platform be available?
SEBI aims to integrate commodity-specific brokers into the Samuhik Prativedan Manch by December 2025 to simplify compliance.
What challenges are being addressed by SEBI?
SEBI is working with the government to resolve GST-related challenges that investors face when receiving or delivering commodities via exchange platforms.
