What specific regulatory proposals has SEBI made to improve liquidity in agricultural commodity derivatives in India?

SEBI has proposed two key measures: first, a pilot for select agricultural commodities (such as maize, groundnut, and chilli) to begin with cash settlement and transition to physical delivery only after meeting thresholds based on average daily traded volume, open interest, or a two-year cap from launch; second, raising position limits for agri derivatives — from 0.25% to 0.5% for inflation-sensitive commodities, and from 0.5% and 1% to 1% and 2% for other widely traded categories — while also proposing to cap previously uncapped penalties for position limit breaches.

Why is SEBI introducing cash settlement as an interim measure for certain agricultural commodity derivatives contracts?

SEBI is introducing cash settlement as an interim measure because physical delivery — the current norm for commodity derivatives in India — can curb liquidity and participation, as requiring delivery of underlying goods reduces the ease of trading; the regulator clarified that this does not represent a policy shift away from physical settlement, and cash settlement is intended solely as a temporary step until predefined liquidity thresholds are met.

India proposes cash settlement, relaxed position limits to boost agri derivatives liquidity

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India proposes cash settlement, relaxed position limits to boost agri derivatives liquidity — ChemBrief Topics

India proposes cash settlement, relaxed position limits to boost agri derivatives liquidity

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