India’s SEBI proposes opening commodity derivatives to foreign investors

India’s markets regulator has put forward a proposal that could meaningfully reshape how foreign money flows into the country’s commodity markets. The Securities and Exchange Board of India released a consultation paper on August 11 that would allow foreign portfolio investors to trade physically settled derivatives contracts across a range of non-agricultural commodities, including crude oil, natural gas, gold, and silver. Right now, foreign portfolio investors can only access cash-settled contracts in non-agricultural commodities. The physical market, where contracts are tied to actual delivery of the underlying asset, has remained off-limits. What’s actually changing The proposal also covers non-agricultural index derivatives, regardless of settlement type, which broadens the scope further beyond individual commodities. As of the proposal date, foreign portfolio investor open interest in commodity futures stood at Rs 1,255 crore, while options open interest was significantly larger at Rs 8,708 crore. The options figure reflects a pattern SEBI itself acknowledges: even the limited access granted so far has already driven meaningful participation, particularly in crude oil and nat...