Close this search box.

Commodity derivatives ban – The Hindu BusinessLine – BusinessLine

Market regulator Securities and Exchange Board of India (SEBI) has issued fresh directions related to commodity derivatives. According to SEBI, no new derivative contracts will be launched on seven agri commodities and no new positions will be allowed to be opened in the running contracts. Investors and traders will only be allowed to square-off i.e., liquidate their existing positions. This comes with immediate effect and the directions will be applicable for one year.

The commodities include paddy (non-basmati), wheat, chana, mustard seeds and its derivatives, soya bean and its derivatives, crude palm oil and moong.

The reason for this could be increased speculation and hardening inflation. Food and commodity prices have been on on upswing. The Consumer Price Index (CPI) and the Wholesale Price Index (WPI) grew 4.91 and 14.23 per cent, respectively in November.

Since there will be no new contracts for at least next one year, hedgers of these commodities will be short of medium for hedging. From the perspective of investors and traders, there are chances for liquidity to the impacted and thus, spreads might go up in the coming sessions. Also, volatility could shoot up increasing the cost of exit.

Notably, among the commodities listed, directions for suspension of derivatives on chana and mustard seeds were already announced on August 16 and October 8, respectively. Therefore, from the remaining, soya bean and crude palm oil are the most liquid. Participants actively trading in derivatives on these two commodities are the ones who should look to exit with minimal damage.

Send your queries to