SEBI’s review of position limits for non-agricultural commodity derivatives and its proposal for phased physical settlement in selected agricultural contracts are separate policy tracks. The agricultural proposal would let certain delivery-based contracts begin with financial settlement and move to mandatory physical settlement after specified triggers; it does not establish a change to non-agri contract limits. SEBI listed a position-limits circular on September 9, 2026, but the listing alone does not show whether non-agri limits changed or when any change takes effect.
What SEBI proposed for phased physical settlement
In a May 12, 2026 consultation, SEBI proposed allowing exchanges to revive illiquid, or launch new, delivery-based contracts on selected agricultural commodities. Under the proposed design, a contract could start with financial settlement and switch to mandatory physical settlement when predefined thresholds are met. Delivery specifications would be set from the outset, with financial settlement serving as a transition rather than the intended permanent arrangement. Read SEBI’s consultation paper.
When the proposed switch would happen
The proposed exemption from physical settlement would end when an Average Daily Traded Volume (ADTV) and/or open-interest threshold is crossed, or two years from expiry of the relevant contract period, whichever occurs first. The consultation does not, by itself, make this design an implemented rule.
Possible pilot commodities
SEBI named maize, groundnut and chilli as possible pilot commodities. They were examples for consultation, not confirmed selections. The paper invited views on whether the approach is appropriate, what safeguards are needed, which commodities might suit it, and what alternatives could work. The comment deadline was June 2, 2026.
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In a December 20, 2025 address, SEBI Chairman Tuhin Kanta Pandey said: “The Working Group to review the non-agri commodity derivatives segment will be notified shortly.” He described enhanced institutional participation as a way to improve liquidity and make the market more attractive for hedging, but did not announce specific higher position limits. Read the chairman’s address.
A position limit is a cap on open positions. The December address does not specify a new non-agri cap, the participant categories it would cover, how positions would be monitored, or an effective date. Those details cannot be inferred from the announcement that a review would take place.
The May client-limit consultation is not evidence of a non-agri increase
SEBI’s separate May 12, 2026 consultation on client position limits discusses proposed client-limit changes for agricultural derivatives. It also addresses penalties for position-limit breaches across agricultural and non-agricultural commodity derivatives. The inclusion of non-agri contracts in the penalty discussion does not mean the paper proposed higher non-agri client limits. Read the client-limit and penalty consultation.
What the September circular listing confirms
SEBI’s listing dated September 9, 2026 names a circular, “Review of Position Limits for Clients and Penalty Provisions for Violation / Breach of Position Limits for Commodity Derivatives Segment.” Its circular number is HO/47/16/13(5)2026-MRD-POD1/I/20735/2026. The listing confirms the title and date, but does not present the operative provisions. Without the full circular text, it is not possible to state whether non-agri client limits changed, which participants are affected, what monitoring basis or exemptions apply, or when any provision commences. Open SEBI’s circular listing.
Why the two policy tracks should not be conflated
Position limits and settlement method address different features of commodity derivatives. A position limit constrains the size of open positions; settlement determines how a contract is completed. The December working-group announcement concerns review of the non-agri segment. The phased-settlement consultation concerns selected agricultural contracts that would be delivery-based, with a proposed temporary financial-settlement stage. One does not establish the rules for the other.
The settlement proposal’s intended balance is to give a thin or new agricultural contract time to build liquidity and participation while retaining physical delivery as its eventual destination. Any assessment of the design turns on issues such as liquidity, convergence with physical-market prices, delivery and warehousing readiness, objective transition triggers, and risk controls during financial settlement.
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Market context in SEBI’s December 2025 address
SEBI’s chairman said 104 distinct commodities and variants had been notified for trading on recognized stock exchanges, while 34 unique commodities were available for trading: 23 agricultural and 11 non-agricultural. The address cited annual notional turnover of ₹580 trillion in FY 2024–25 and ₹628 trillion as of October 31, 2025, drawing on SEBI’s Annual Report and November 2025 bulletin. These figures describe the market context in that address; they do not demonstrate that either the position-limit review or settlement proposal has been implemented.
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How to read future updates
- For position-limit changes, look for operative language in the full circular: the revised cap, participant category, measurement or monitoring basis, exemptions, and commencement date.
- For phased settlement, distinguish consultation proposals from a final SEBI decision and exchange-level contract specifications. Confirm which commodities are selected and what thresholds apply.
- Check the relevant SEBI commodity-derivatives listing for subsequent documents: SEBI commodity-derivatives notices.
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