Brief Overview:
Proposal for internationalising India’s commodity derivatives market by moving Foreign Portfolio Investors (“FPIs”) beyond the current cash-settled framework and giving them access to a wider range of commodity exposures has been placed for public consultation; comments are invited until 1st September 2026.
Technical Details:
Key Highlights
1) Permits FPIs to:
(a) participate in all non-agricultural commodity index derivatives, irrespective of whether the underlying commodity contracts are physically or cash settled; and
(b) trade physically settled non-agricultural commodity derivatives (including gold, silver, crude oil, natural gas and base metals), subject to safeguards to ensure that FPIs do not take or make physical delivery.
2) FPIs will need to enter into prescribed tripartite agreement with the Professional Clearing Member (PCM), and the Trading Member (TM) or bipartite agreement with the Trading-cum-Clearing Member (TCM) as a pre-condition for trading physically settled commodity derivative contracts.
3) Exclusion of FPI participation in deliverable options contracts (options in goods), notwithstanding the wider access being proposed for commodity derivatives.
Takeaways:
The proposals are expected to increase institutional participation, improve liquidity and represents a calibrated expansion of FPI access to India’s commodity derivatives market, allowing foreign investors to participate in a broader range of commodity products.
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