Capital market regulator SEBI has extended the suspension of derivatives trading in seven agricultural commodities—paddy (non-basmati), wheat, chana, mustard seeds (including its complex), soybean (including its complex), crude palm oil, and moong—by one year.
On December 19, 2021, SEBI directed stock exchanges with a commodity derivatives segment to suspend trading in derivative contracts for these commodities till December 20, 2022.
Thereafter, the suspension in trading was extended thrice, with the latest extension till March 31, 2025.
Reviewing the suspension, SEBI on Monday decided to extend it further until March 31, 2026.
Market facing uncertainty
Narinder Wadhwa, Managing Director & CEO of SKI Capital Services, said instead of keeping the market in a state of uncertainty, a more stable and well-regulated commodity trading framework would be a better long-term solution.
The government should focus on long-term structural reforms to enhance market stability by encouraging broader participation from Farmers’ Producer Organisations, institutional investors and hedgers to improve liquidity and reduce excessive speculation, he added.
“Frequent bans create uncertainty, deterring both domestic and foreign investors. This undermines efforts to develop a robust agricultural derivatives market,” he said.
With limited tradable agricultural commodities, market depth remains weak, reducing hedging opportunities for farmers and businesses.
Farmers and food processors rely on commodity derivatives for hedging price risks, said Wadhwa.
Traders may move to informal markets or alternative financial instruments, making regulation more challenging, he said.