Sebi Extends Suspension of Derivatives Trading of 7 Agri Commodities For 1 Year Till December 2023

Markets regulator Sebi has extended the suspension of derivatives trading of paddy (non-basmati), wheat, chana, mustard seeds and its derivatives, soybean and its derivatives, crude palm oil and moong, for one more year till December 20, 2023. The move by Sebi has been taken to curb inflation in the country.

“The suspension of trading in the above contracts has been extended for one more year beyond December 20, 2022, i.e. till December 20, 2023,” the Securities and Exchange Board of India (Sebi) said in a late-night order passed on Tuesday.

In December 2021, the markets regulator had prohibited exchanges from launching new derivative contracts of soyabean, mustard seeds, channa, wheat, paddy, moong and crude palm oil in order to rein in prices. These directions were applicable for one year.

The suspension permits squaring up of existing positions in these commodities but no fresh futures trading is permitted in them for a year.

According to the latest data, the retail inflation in India in November eased to an 11-month low of 5.88 per cent with food prices seeing sharp cooling. Inflation in the food basket, or the Consumer Food Price Index, decelerated to 4.67 per cent in November this year, compared with 7.01 per cent in October.

The Solvent Extractors’ Association of India on Wednesday said in a statement, “Sebi has issued a notice of continuation of the ban imposed on futures trading on certain commodities, including edible oils. This decision has not gone down well with our members as they had suffered massively due to high volatility in the markets… Many studies conducted in the past have amply clarified that futures trading is not responsible for inflationary pressures.”

It added that in the absence of trading on commodity exchanges, importers were put to grief and lost money. “We were hopeful that the ban would be lifted.”

Earlier this month, the Commodity Participants Association of India (CPAI) had urged the government and Sebi to allow exchanges to resume trading in these seven agricultural derivatives contracts.

In its letter to the Finance Ministry and Sebi, the association had said the prolonged bans are detrimental to the Indian commodity market ecosystem and severely dent the perception regarding India’s ease of doing business environment.

During the last one year, the price of some of these commodities has been below or around MSP, and many studies concluded that the commodity prices are predominantly governed by supply and demand factors, and trading on exchanges has no impact on the price, CPAI had mentioned.

The association suggested that easily reversible options, such as increasing margin and lowering open interest limits for commodity derivatives contracts may be resorted to in case significant volatility is observed in agri-commodity contracts.

(With Inputs From Agencies)

Read all the Latest Business News here