Securities and Exchange Board of India has issued a consultation paper proposing wider participation of foreign portfolio investors in commodity derivatives. The regulator suggests allowing FPIs in non‑agricultural commodity index derivatives to expand their role in the market. SEBI also proposes FPI access to non‑cash settled non‑agri commodity derivatives, covering crude oil, natural gas, gold, silver and base metals.
Another proposal includes permitting FPIs in physically settled non‑agri commodity derivatives under strict conditions. FPIs would need to exit positions before the delivery period. If positions are not squared off or rolled over, they would be transferred to trading members. SEBI has made it clear that FPIs cannot take physical delivery under the proposed framework.
The regulator believes these measures will deepen India’s commodity markets, attract foreign capital and improve liquidity. Broader participation is expected to strengthen price discovery and risk management in commodities. The proposals reflect SEBI’s strategy of modernising market access while ensuring safeguards against delivery risks.
Stakeholders are invited to share feedback on the consultation paper. The final framework will depend on responses received. If implemented, the changes could significantly enhance India’s commodity derivatives market and bring it closer to global standards, offering new opportunities for foreign investors while maintaining strict compliance with domestic rules.
