The Securities and Exchange Board of India (SEBI) on Thursday, 24 September 2026, approved foreign portfolio investor (FPI) participation in non-cash-settled, non-agricultural commodity derivatives. FPIs will have to exit these positions before any delivery obligation arises, a safeguard that keeps them away from the physical settlement of bullion, energy and base metal contracts.
The decision was part of a wider set of SEBI board approvals that also overhauled portfolio management rules and settlement proceedings. Shares of Multi Commodity Exchange of India (MCX) are in focus on Friday after the announcement.
What SEBI’s FPI Commodity Decision Changes
Until now, FPIs could trade only cash-settled non-agricultural commodity contracts and indices made up of such commodities. That framework has been in place since SEBI first allowed FPIs into exchange-traded commodity derivatives in September 2022.
The new approval goes further in two ways. FPIs can now trade non-agricultural index derivatives irrespective of whether the underlying contracts are cash-settled. They can also trade non-cash-settled non-agricultural commodity derivatives, which are contracts that normally end in physical delivery of the commodity.
| Parameter | Details |
|---|---|
| Cash-Settled Non-Agri Commodity Contracts | Allowed earlier, remains allowed |
| Non-Agri Commodity Indices | Earlier allowed only where cash-settled, now allowed irrespective of underlying settlement |
| Non-Cash-Settled Non-Agri Contracts | Not allowed earlier, now allowed with exit required before delivery |
| Agricultural Commodity Contracts | Not allowed, no change announced |
In simple terms, a cash-settled contract ends with a money payment based on price difference. A non-cash-settled, or delivery-based, contract can require the seller to deliver and the buyer to take delivery of the actual commodity at expiry.
The Delivery Firewall Explained
The key condition is that FPIs must close their positions in delivery-based contracts before the delivery obligation begins. This lets foreign investors trade price exposure in these contracts without handling physical gold, silver, metals or energy products in India.
SEBI said it will adopt several safeguards for this route. Operational details, such as the exact exit timelines and the effective date, have not yet been released and will matter for how quickly FPIs can start trading.
Non-agricultural commodity derivatives in India broadly cover three groups: bullion such as gold and silver, energy such as crude oil and natural gas, and base metals such as copper and zinc. Agricultural contracts remain outside the FPI route.
Why the Move Matters for MCX and Commodity Markets
SEBI’s stated aim has been to deepen institutional participation in India’s commodity derivatives market. Higher participation from large investors is generally linked to better liquidity, which makes a market more useful for hedging.
The proposal is not new. In September 2025, SEBI Chairman Tuhin Kanta Pandey said at an MCX conference that allowing FPIs in non-cash-settled, non-agricultural commodity contracts was under active consideration. Thursday’s board approval turns that proposal into a decision.
Whether volumes rise meaningfully will depend on how many FPIs use the route.
- Commodity exchanges: a wider pool of eligible participants in bullion, energy and base metal contracts.
- Domestic hedgers: potentially more counterparties in delivery-based contracts.
- FPIs: access to Indian price benchmarks, but with a mandatory exit before delivery.
- Retail traders: no direct rule change for their own positions.
Domestic participants need a commodity trading account with a broker registered for the commodity segment to trade these contracts. Traders who follow MCX gold, silver or crude contracts on an online trading platform can track open interest and volume data to see whether foreign participation picks up once the framework is notified.
Other Key SEBI Board Decisions on 24 September
The commodity decision came with a broad package of reforms. The largest was a new set of Portfolio Managers Regulations, 2026, replacing the 2020 rules.
PMS Rules Get More Room
SEBI approved a new portfolio managers route for investing in mutual fund units, called PRIM. It allows portfolio management service (PMS) providers to invest client money in direct mutual fund schemes and specialised investment funds (SIFs), through a separate investment approach with a minimum ticket size of ₹25 lakh.
Discretionary PMS providers can invest up to 10% of client assets under management in investment-grade unlisted debt securities, with client consent. PMS providers are also allowed to invest in IPOs, primary debt issuances and exchange-traded derivatives.
Investors who do not meet PMS ticket sizes can still open demat account online and buy direct mutual fund plans or apply for IPOs on their own.
Settlement Proceedings Overhaul
SEBI approved changes to the Settlement Proceedings Regulations, including a new formula for calculating settlement amounts and separate treatment of wrongful gains. It will issue a settlement notice before a show-cause notice, giving entities 60 days to file a settlement application, except where an interim order is being considered.
A fast-track settlement route will apply where the settlement amount is up to ₹10 lakh and the case involves a disclosure-related violation. Cases involving misrepresentation of financial statements or diversion of funds can now also be settled.
Advertising and Other Changes
A common advertisement code for certain regulated entities was approved. It allows celebrities in brand-level or entity-level promotion, and removes some mandatory prior approvals except for ads that carry celebrity endorsements.
SEBI also relaxed call recording requirements for research analysts dealing with institutional clients, expanded vault manager norms beyond electronic gold receipts, and approved ease-of-doing-business steps for REITs and InvITs. Changes to the accredited investor framework and to NCD listing requirements were also cleared.
What to Watch Next
SEBI’s board approval is the first step. The formal circular and amended regulations will set out the exact FPI exit timelines, other operational safeguards and the date from which the new route applies.
For commodity market participants, the next data points are the circular itself and early trading data from commodity exchanges once FPIs begin using the route. For PMS clients, the new PRIM route and IPO investment permission will become relevant once the 2026 regulations are notified.
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