From Price Takers To Price Makers: Sebi Chief Outlines Measures to Transform India’s Commodity Market

Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey has outlined four strategic priorities to build a robust ecosystem across India’s commodity market.

At the Multi Commodity Exchange global commodity conclave held on August 12, 2026, he told stakeholders from the domestic securities market that while India’s commodity derivatives market has experienced rapid growth, scale alone is not enough.

He highlighted the sharp rise in trading turnover across exchanges, and said that India must leverage its economic weight as a major producer and consumer of key commodities to transition from a price taker to a price maker.

Making Participation Easier

Pandey said that Sebi has proposed several measures to streamline market access and reduce regulatory friction. Following public consultation, Sebi will issue guidelines on position limits for agricultural commodities, alongside the rationalisation of margin frameworks, he said.

“We are looking at streamlining the position limit and margin frameworks to lower avoidable costs while preserving risk controls,” he said.

The proposal seeks to make trading more affordable and simpler for participants. Sebi has also proposed ease of doing business initiatives, including establishing a single Investor Protection Fund at the exchange level and extending Direct Market Access for commodity derivatives to all investor categories. The regulator is also engaging with the Goods and Services Tax (GST) Council on issues related to the physical delivery of commodities.

For commodity investors, these proposals can potentially decrease transactional friction. Extending direct market access to all investor classes and simplifying options frameworks can also allow more participants in the market.

Broadening the Participant Base

Sebi is also looking at a framework to enable wider access to foreign portfolio investors (FPIs). The proposal focuses on allowing FPIs greater access to domestic commodity indices as well as physically settled non-agricultural derivative contracts across exchanges.

“A deeper mix of commercial and institutional participants will strengthen liquidity, price discovery, and the effectiveness of hedging,” Pandey said.

By attracting international institutional money to participate in the Indian commodities market, buying and selling can become easier for investors. For commodity investors, the entry of foreign portfolio capital can boost liquidity and drive trading volumes higher, thereby decreasing volatility in the commodity market.

Strengthening Connection with Physical Markets

Pandey mentioned in his speech that Sebi has finished consultations on a phased physical settlement architecture for agricultural commodities. Additionally, Sebi is examining the expansion of the Sebi Vault Managers Regulations beyond electronic gold receipts (EGRs) to cover the broader bullion ecosystem.

“The objective is to help liquidity develop alongside the delivery ecosystem,” Pandey said.

This means that the trading of financial contracts will closely match actual physical goods sitting in certified warehouses to prevent price distortions. For commodity investors, closer integration between financial contracts and physical market realities can lower basic risk, thus ensuring derivative prices mirror spot supply and demand accurately.

Investing in Knowledge and Research

Sebi is also expanding education initiatives under Project Jagrook to improve market awareness among farmers, small enterprises, and institutional users.

He also highlighted the launch of the MCX Centre for Commodity Markets at the National Institute of Securities Management (NISM) to conduct India-specific research and build risk management capabilities.

“Markets cannot deepen sustainably merely because more contracts are introduced,” Pandey said, adding that participants must understand their utility and risks. For commodity investors, this focus on research creates a safer, more transparent trading environment.

With the commodity derivatives market preparing for its next phase of development, Pandey stated that Sebi remains committed to translating economic scale into meaningful utility for the real economy.

“At Sebi, we will continue working with the government, fellow regulators, exchanges, industry, academia and market users to translate these strengths into deeper, fairer and more useful markets,” Pandey added.