SEBI Expands FPI Access to Commodity Derivatives Market

Securities and Exchange Board of India (SEBI) has proposed expanding foreign portfolio investors' access to India's exchange-traded commodity derivatives market. The regulator aims to deepen institutional participation, improve liquidity, and strengthen price discovery across key non-agricultural commodities.

The current rules allow FPIs to participate in cash-settled non-agricultural commodity derivatives and indices comprising such commodities. Since SEBI allowed FPI participation in Indian exchange-traded commodity derivatives in 2022, there has been a notable increase in liquidity and open interest, particularly in crude oil and natural gas options.

Under the proposed framework, FPIs would be required to square off or roll over open positions in physically settled contracts before the commencement of the tender or staggered delivery period. If an FPI fails to do so voluntarily, the position would automatically be transferred to the designated Trading Member (TM) or Trading-cum-Clearing Member (TCM).

SEBI's Commodity Derivatives Advisory Committee has backed both proposals. The regulator has invited public comments on the proposals by September 1.