The Securities and Exchange Board of India (SEBI) is preparing to widen institutional participation in the country’s commodity derivatives market, Chairman Tuhin Kanta Pandey said on Wednesday. According to IANS, the regulator will engage with the government on proposals to allow banks, insurance companies and pension funds into the segment, alongside a plan to expand foreign portfolio investor (FPI) access.
Institutional access under review
Speaking at a Multi Commodity Exchange (MCX) event on Wednesday, Pandey said SEBI is working on a framework to open non-agricultural, non-cash settled contracts to FPIs. At present foreign investors are restricted to cash-settled products such as crude oil and natural gas.
Allowing banks, insurers and pension funds into the segment, would bring stability and higher volumes. “Enhanced institutional participation will bring in liquidity, making the market more attractive for risk management,” he said.
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Safeguards and reforms
The SEBI chief emphasised that safety and transparency will remain the regulator’s first priority. Measures such as real-time margin collection and continuous monitoring are critical to protecting participants, he said.
The regulator has already formed a committee to recommend reforms for agricultural commodities and plans to set up a working group for the non-agricultural segment, particularly metals. Commodity platforms, Pandey stressed, should not remain the preserve of large traders and corporations but also serve mutual funds and alternative investment funds (AIFs) that increasingly view metals as a viable asset class.
Compliance push by December 2025
SEBI will bring commodity-specific brokers onto the Samuhik Prativedan Manch, a unified reporting platform, by December 2025 to simplify compliance. It is also working with the government to resolve Goods and Services Tax (GST)-related hurdles for investors opting for physical delivery of commodities.
Awareness drives and education programmes will be rolled out to widen participation. Institutional entry could significantly increase trade in bullion, base metals and energy products. Shares of MCX rose 3.66 per cent to Rs 7,930.85 on Wednesday after reports of SEBI’s plans. MCX, India’s largest commodity derivatives exchange with nearly 99 per cent market share by value in Q1 FY26 (April-June 2025), reported a net profit of Rs 203.19 crore in the quarter. That marked an 83 per cent jump year-on-year and a 50 per cent rise sequentially, with operating income climbing 59 per cent to Rs 373.21 crore. Pandey said the commodity market has a vital role in securing critical minerals such as lithium, cobalt and rare earths amid global trade tensions. “A robust derivatives market provides a shield against global price shocks, especially in the context of critical minerals that power the green energy future,” he said.
