SEBI Likely To Allow FPIs In Commodity Derivatives Trading: Report

The Securities and Exchange Board of India (SEBI) is likely to open India’s commodity derivatives market to foreign portfolio investors (FPIs) by allowing them to trade in select contracts from September, according to a report by CNBC TV-18.

The proposed framework will permit FPIs to participate in non-cash settled, non-agricultural commodity derivative contracts.

The move is expected to increase participation in the commodity market and provide overseas investors with another route to access Indian financial markets.

SEBI plans wider participation in commodity derivatives

The regulator had issued a consultation paper on August 12 seeking feedback on allowing FPIs to enter eligible commodity derivative contracts. The consultation process concluded on September 1.

According to the report, SEBI may issue a circular on the matter without requiring approval from its board. The final framework is expected to remain largely aligned with the proposal outlined in the consultation paper.

Under the proposed rules, FPIs will be able to participate in approved commodity derivative contracts while complying with existing regulatory requirements and risk management measures.

The move is part of SEBI’s broader efforts to improve market access and strengthen the derivatives ecosystem. Allowing greater foreign participation could increase liquidity and bring more institutional investors into India’s commodity markets.

Regulator reviews derivative settlement rules

Separately, SEBI is examining changes to the methodology used for determining settlement prices of derivative contracts following feedback on the recently introduced Closing Auction Session (CAS).

The regulator introduced CAS in the equity cash segment from August 3, 2026, to determine official closing prices of securities. The closing price calculated through CAS is also used for settling derivative contracts on expiry.

SEBI said stakeholders had raised concerns, particularly regarding the use of CAS-based closing prices for derivative settlement. After reviewing the initial implementation experience and receiving industry feedback, the regulator indicated that changes may be proposed.

A discussion paper outlining possible modifications to the settlement methodology is expected within a week.