Sebi Extends Suspension Of Trading In 7 Agri Commodity Derivatives For 1 Year

The Sebi has extended the suspension of futures and options trading in seven agricultural commodities, including wheat and moong, for one more year till December 2023 in a bid to rein in prices

The other agricultural commodities suspended by Sebi are paddy (non-basmati), chana, crude palm oil, mustard seeds, and their derivatives and soya bean and its derivatives. 

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Capital markets regulator, Securities and Exchange Board of India (Sebi), has extended the suspension of futures and options trading in seven agricultural commodities, including wheat and moong, for one more year till December 2023 in a bid to rein in prices, the PTI reported on Wednesday.

According to the report, the other agricultural commodities suspended by Sebi are paddy (non-basmati), chana, crude palm oil, mustard seeds, and their derivatives and soya bean and its derivatives. 

The suspension permits squaring up of existing positions in these commodities, but no fresh futures trading is permitted in them for a year. To curb inflation, the Sebi in last December prohibited exchanges from launching new derivative contracts of soyabean, mustard seeds, channa, wheat, paddy, moong, and crude palm oil. These directions were applicable for one year.

Sebi in a statement on Wednesday said, “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.”

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.