SEBI Extends Suspension on Trading of Commodity Derivative Contracts

• 25 Mar 2025
• 719 Views

The Securities and Exchange Board of India (SEBI) has extended the suspension of trading in derivative contracts for certain commodities in the Commodity Derivatives Segment. This decision follows multiple extensions and is part of SEBI's regulatory measures to maintain market stability.

Initial Suspension Order (December 2021)

On December 19, 2021, SEBI directed stock exchanges with a Commodity Derivatives Segment to suspend trading in derivative contracts for the following commodities until December 20, 2022:

• Non-basmati Paddy

• Wheat

• Chana (Chickpeas)

• Mustard seeds and its derivatives

• Soya bean and its derivatives

• Crude Palm Oil

• Moong (Green Gram)
  
  

This decision is intended to reduce excessive speculation and market volatility, especially for these key agricultural commodities, which play a major role in influencing food prices and inflation.

Extensions of the Suspension

After the original suspension, SEBI extended the trading ban for these commodities several times based on the evolving market conditions:

• First Extension: The suspension was extended until December 20, 2023.

• Second Extension: The suspension was further extended until December 20, 2024.

• Third Extension: SEBI extended the suspension until January 31, 2025.

• Fourth Extension: The suspension was extended once more until March 31, 2025.
  
  

These extensions were issued in response to continued concerns over price volatility in these commodities.

Latest Extension (March 2025)

In continuation of previous directions, SEBI has further extended the suspension of trading in the derivative contracts for these commodities until March 31, 2026.

Ending Note

SEBI’s actions reflect ongoing efforts to regulate the Commodity Derivatives Segment and ensure market stability, particularly in essential agricultural commodities. By extending the suspension, SEBI aims to address the volatility that often arises from speculative trading in these markets, which can significantly impact food prices and inflation. The suspension of trading in derivative contracts for these specific commodities is in effect until March 31, 2026, offering a temporary measure to mitigate risks associated with excessive market speculation.

While the suspension restricts new futures trading, it allows for the squaring up of existing positions, providing a controlled exit for market participants who currently hold contracts. This is done to prevent sudden market disruptions and to maintain a degree of order in the market. No fresh futures trading can take place for these commodities for a year, ensuring that new positions do not contribute to further price instability.

Through this extended suspension, SEBI continues to exercise caution and closely monitor market conditions, with the goal of preserving the integrity of the commodity derivatives market and protecting the interests of stakeholders. It also provides additional time for regulators, market participants, and other involved parties to assess the long-term impact of these measures and formulate strategies that could better address market challenges in the future.

Sources: 

• SEBI

• CNBCTV18