SEBI Plans to Bring Back Commodity Derivatives Market Regulator

The Securities and Exchange Board of India (SEBI) is planning to restore its commodity derivatives market regulation department (CDMRD), nearly 5 years after it was merged with another division.  

According to news reports, the department may be brought back from July and could function under a separate executive director. 

CDMRD was merged with SEBI’s market regulation department (MRD) in 2021 as part of an internal restructuring exercise.  

Both departments dealt with common entities such as exchanges and brokers, and the merger was aimed at reducing duplication of work. 

Industry Had Sought Restoration 

Market participants in the commodity derivatives segment had been seeking the return of a separate department over the past year. Industry representatives had also submitted requests to the regulator after SEBI Chairman, Tuhin Kanta Pandey assumed office. 

According to reports, there was a view within the industry that policy attention towards commodity markets had weakened after the merger. The proposed reinstatement is being seen as a step towards restoring a separate regulatory focus for the segment. 

Functions Earlier Handled by CDMRD 

Before the merger, the department handled policy matters related to commodity derivatives and supervised market infrastructure institutions linked to the segment. It also conducted consultations with stakeholders and monitored compliance-related activities. 

The department’s work included inspections, investor grievance redressal, disciplinary proceedings, maintenance of market-related databases, and investor awareness programmes.  

SEBI Reviewing Commodity Market Proposals 

In recent months, SEBI has floated consultation papers related to the commodity derivatives market. The proposals include increasing client-level position limits for agricultural commodity derivatives and revising penalties for breaches of those limits. 

The regulator has also proposed allowing select agricultural commodity contracts to initially operate as cash-settled contracts before shifting to compulsory physical settlement after meeting specified thresholds.  

Separately, SEBI is examining measures for increasing participation by foreign portfolio investors in the segment. 

Read More: Apple India Set to Hit ₹1.42 Lakh Crore Revenue Mark in FY26: Report! 

Conclusion 

The reinstatement of CDMRD is expected to bring commodity derivatives under a separate regulatory framework within SEBI after nearly 5 years. 

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