The Securities and Exchange Board of India (SEBI) is examining position limits for non-agricultural commodity contracts as it looks to improve liquidity and market depth without weakening risk controls.

SEBI Chairman Tuhin Kanta Pandey said the regulator is also working on several other issues that could make India’s commodity derivatives market more efficient.

What are position limits?

Position limits restrict how large a position a market participant can hold in a particular commodity contract. Such limits are designed to prevent excessive concentration and reduce the risk of market manipulation. However, limits that are too restrictive can also make it harder for contracts to attract enough participants and trading activity.

SEBI is therefore examining whether the existing limits for non-agricultural contracts can be adjusted to help these markets gain greater depth. Pandey said the objective is to allow contracts to grow while maintaining appropriate risk controls.

SEBI looks at physical settlement rules

SEBI is also examining how commodity contracts are settled.

Pandey said that in some agricultural commodities, requiring physical settlement from the beginning can make it harder for a contract to develop.

A phased approach could allow contracts to mature before physical settlement becomes mandatory, he said.

SEBI has completed consultations on the issue and guidelines are expected to follow.

GST issues also under discussion

The regulator is engaging with stakeholders on GST-related issues affecting participants who give or receive commodities through exchange platforms.

The aim is to reduce structural friction that can make participation in commodity markets more difficult.

SEBI’s broader focus is on creating markets that can attract producers, commercial users, processors, farmers and other participants while maintaining market integrity.

Why does commodity-market liquidity matter?

A deeper market generally means more buyers and sellers are available to trade.

For businesses that use commodities as part of their operations, a liquid derivatives market can help them manage price risks. This includes physical hedgers who use contracts to protect themselves against changes in commodity prices.

Pandey said technology can improve access and efficiency, but technology used in commodity markets must reflect the needs of producers, farmers, processors, commercial users and physical hedgers.

SEBI wants more investor awareness

SEBI also plans to strengthen investor awareness through Project Jagrook.

The initiative will focus on educating farmers, farmer producer organisations (FPOs), MSMEs, hedgers and other users about commodity derivatives.

Pandey stressed that greater access to financial markets is not enough if participants do not understand how the products work.

For smaller businesses and farmers, this is particularly important because commodity derivatives can help manage price risk but also carry risks that participants need to understand.

More participation in cash and derivatives markets

SEBI is also working towards deeper and more liquid cash markets.

According to Pandey, wider participation, stronger securities borrowing and lending and more efficient hedging and arbitrage could improve price discovery.

Better interaction between cash and derivatives markets could also help market participants manage risks more efficiently.

However, SEBI has stressed that simpler regulation should not mean weaker compliance.

Controls around client funds, margins, reporting and supervision will remain important, with market trust and integrity continuing to be key priorities.

Foreign investors get a role in commodity derivatives.

The developments follow a recent SEBI board decision to allow foreign portfolio investors (FPIs) to participate in physically settled, non-agricultural commodity derivative contracts, subject to safeguards.

The move could bring wider participation to India’s commodity derivatives market.

For the common investor and businesses, SEBI’s latest approach is aimed at balancing two objectives: making commodity markets deeper and easier to use while ensuring that stronger participation does not come at the cost of market safety and investor protection.

The question of how much Indian money can move overseas is a matter for the Reserve Bank of India (RBI), not the Securities and Exchange Board of India (SEBI), SEBI Chairman Tuhin Kanta Pandey said on Wednesday. His comments came days after SEBI’s board approved new regulations allowing portfolio managers to invest client funds in specified overseas securities. Speaking at the annual conference of the Association of Portfolio Managers in India (APMI), Pandey was asked whether the new permission could result in more Indian money moving abroad. He said the amount that can move overseas and the route through which it can be sent must follow the Liberalised Remittance Scheme (LRS) and the Foreign Exchange Management Act (FEMA) rules.

What has SEBI changed?

SEBI’s board approved the SEBI (Portfolio Managers) Regulations, 2026 on September 24.

The new regulations allow discretionary and non-discretionary portfolio managers to invest in specified overseas securities.

These include:

• – Listed equity and debt
• – Real Estate Investment Trusts (REITs)
• – Overseas mutual funds
• – Exchange-traded funds (ETFs)
• – Index funds
• – Foreign government debt

However, the permission remains subject to FEMA and RBI’s LRS framework.

This distinction is important. SEBI’s permission allows portfolio managers to make certain overseas investments, but it does not independently determine how much money can leave India.

Pandey did not specify how the limits would apply to overseas allocations by PMS clients and referred that question to the RBI.

Why does this matter to Indian investors?

For investors using portfolio management services (PMS), the regulatory change could provide access to a wider range of overseas investments.

But the ability to invest abroad does not mean investors can freely transfer unlimited amounts of money overseas.

The applicable limits and foreign exchange rules continue to matter. The Moneycontrol report notes that overseas investments under the new PMS framework remain subject to the RBI’s LRS and FEMA requirements.

For an ordinary investor, the key point is that SEBI regulates the investment product and intermediary, while RBI’s foreign exchange framework determines the applicable limits for money moving overseas.

SEBI and RBI working on faster FPI registration

Pandey also said SEBI and the RBI are working to make registration for Foreign Portfolio Investors (FPIs) faster and more digital.

The RBI is looking at allowing FPI registration documents to be uploaded through SWIFT, according to Pandey.

SEBI has already introduced several measures aimed at simplifying the process, including:

• A revamped NSDL front end
• India Market Access portal
• A common application portal with tracking
• Digital signatures instead of physical signatures
• E-power of attorney

Pandey said these measures can reduce the need for processes such as notarisation, apostille and consularisation.

What about India’s market performance?

Pandey was also asked about the recent decline in the Indian market compared with markets in Japan and South Korea.

He said decisions about where investors should put their money are for investors to make and that it would not be appropriate for regulators to comment on such investment choices.

He instead pointed to the regulators’ focus on making FPI registration easier.

SEBI also flags issue of inactive listed companies

Pandey also addressed concerns about listed companies that have little or no visible business activity.

He said stock exchanges have a continuing responsibility to monitor companies after listing. Where a company is not physically present or carrying out economic activity, delisting provisions are available.

He also said physical verification by exchanges is feasible and stressed that the process should be followed properly so investors can have confidence that listed companies are genuine.

The common investor takeaway

The latest change does not mean SEBI has opened an unrestricted route for Indian money to move overseas.

SEBI has allowed portfolio managers to invest in specified foreign securities, but those investments remain subject to the RBI’s foreign exchange framework and FEMA rules.

So, for investors, the important distinction is simple: SEBI decides what regulated portfolio managers can invest in, while the RBI’s rules govern the broader framework for moving money abroad.

Source: Moneycontrol

Higher securities transaction tax rates have boosted collections, even as regulatory changes put pressure on derivatives trading volumes. Collections from the Securities Transaction Tax (STT) rose nearly 53 per cent to Rs 40,214.36 crore in 2026-27, as of September 17, compared with Rs 26,305.72 crore during the corresponding period a year earlier.

The sharp increase follows a hike in STT rates that came into effect on April 1, after being announced in the Union Budget. The tax is levied on securities transactions carried out on recognised stock exchanges.

STT rates increased

The government raised STT rates on derivatives transactions from April 1.

• Futures: The rate increased to 0.05 per cent of the traded value, from 0.02 per cent earlier.
• Options premium turnover: The rate rose to 0.15 per cent, from 0.1 per cent.
• Exercised options: The levy increased to 0.15 per cent of the intrinsic value, from 0.125 per cent.

This was the second STT rate hike by the government since 2024.

Deven Choksey, managing director at DRChoksey FinServ, said the increase in collections was primarily driven by the higher tax on derivatives transactions. He said the revised rates allowed the government to collect more revenue from each contract traded.

Choksey also noted that despite regulatory measures introduced by the Securities and Exchange Board of India (SEBI), including larger contract sizes and stricter position limits, overall market transaction values remained high.

Collections rose from previous financial years.

STT collections have increased over the past two financial years.

In FY26, total collections stood at Rs 57,522 crore, compared with Rs 53,296 crore in FY25.

For FY27, the government has projected STT collections of Rs 73,700 crore.

What is STT and how is it charged?

STT is a direct tax imposed on securities transactions conducted on recognised stock exchanges. It applies to trades involving equities, futures and options, as well as equity-oriented mutual funds.

The tax is generally charged on sell transactions in futures and options. For futures, the taxable value is based on the actual traded price, while options transactions are taxed on the premium. When an option is exercised, STT is levied on the settlement price of the day if the contract is in the money.

Collections typically move in line with trading activity and transaction values, which are linked to conditions in the secondary market.

Derivatives volumes face regulatory pressure.

While STT collections have increased, derivatives trading volumes have come under pressure over the past month.

The Business Standard report attributes this pressure to regulatory changes, including the introduction of a closing auction session and a requirement for 100 per cent collateral, among other measures.

The higher tax rates and regulatory changes are therefore affecting different aspects of the market: the tax increase has raised the amount collected per transaction, while new trading requirements have added constraints to derivatives activity.

Brokers asked to remit unpaid STT.

Earlier in March, the Income Tax Department asked stockbrokers to remit STT collected from clients for FY24 and previous years, along with interest, if the amounts had not been deposited into the government account.

The department’s direction concerned tax already collected from clients but not paid to the government.

The rise in STT collections reflects the impact of higher tax rates alongside continued transaction activity. However, the figures alone do not establish whether trading volumes have increased, since the higher levy also means more tax can be collected on each eligible transaction.

This article is for informational and educational purposes only and should not be treated as investment advice. Investors should assess their own financial circumstances and consult a SEBI-registered investment adviser before making investment decisions.