SEBI Proposes Phased Physical Settlement for Agri Derivatives

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  • Last Updated on 15 May, 2026

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SEBI physical settlement agri derivatives

Consultation Paper; Dated: 12.05.2026

The Securities and Exchange Board of India (SEBI) has issued a consultation proposal to permit stock exchanges to adopt a phased approach to physical settlement for select agricultural commodity derivatives contracts.

1. Key Proposal

Under the proposed framework:

  • Stock exchanges would be allowed to:
    1. Revive existing illiquid contracts, and/or
    2. Launch new delivery-based contracts
  • For select agricultural commodities

2. Initial Financial Settlement Mechanism

  • Such contracts would initially commence trading as Financially settled contracts
  • Physical settlement may subsequently be introduced in a phased manner

3. Objective of the Proposal

The move aims to:

  • Improve liquidity in agricultural commodity derivatives
  • Encourage revival of inactive commodity contracts
  • Facilitate better market participation and price discovery

4. Expected Benefits

The phased approach may:

  • Reduce operational challenges associated with immediate physical settlement
  • Allow market participants to gradually adapt to delivery-based mechanisms
  • Strengthen development of agricultural commodity derivatives markets

5. Stakeholder Consultation

  • SEBI has invited comments from stakeholders
  • Comments may be submitted until 2 June 2026

6. Conclusion

SEBI’s proposal seeks to balance market development and operational feasibility by introducing a gradual transition towards physical settlement for agricultural commodity derivative contracts, with the broader objective of improving liquidity and market efficiency.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied