SEBI Overhauls Commodity Derivatives Rules, Doubles Agricultural Position Limits and Caps Penalties

The Securities and Exchange Board of India (SEBI) has overhauled the regulatory framework governing the commodity derivatives market, doubling client-level position limits for agricultural commodities and capping monetary penalties for open-interest violations. Issued through a circular on September 9, 2026, the revised regulations take immediate effect to facilitate ease of doing business and enhance liquidity across commodity exchanges such as MCX and NCDEX. Under the updated norms, client-level position limits for Broad agricultural commodities have been raised to 2% of deliverable supply, while Narrow and Sensitive commodities have been revised to 1% and 0.5% respectively. Furthermore, SEBI relaxed the criteria for qualifying as a Broad Commodity, allowing an agricultural item to qualify if it meets either a 10-lakh metric tonne supply threshold or a ₹5,000 crore monetary valuation over five years. To avoid disproportionate penal burdens from minor operational breaches, the regulator capped daily penalties at ₹10,000 for breaches up to 2% and ₹2 lakh for larger violations. Market participants welcomed the reform, noting that higher trading headroom and predictable penalty structures will encourage greater participation by agricultural traders and food processors.