SEBI proposes regulatory reforms for commodity markets and SME listings

The Securities and Exchange Board of India (SEBI) is introducing several regulatory reforms aimed at deepening market liquidity and expanding investor participation. A key proposal involves allowing foreign portfolio investors (FPIs) to trade physically settled non-agricultural commodity derivatives, such as crude oil, natural gas, gold, and silver. Currently, FPIs are restricted to cash-settled contracts. To prevent physical delivery obligations, SEBI proposes safeguards requiring FPIs to exit or roll over positions before delivery periods begin.

Additionally, SEBI is looking to expand the Accredited Investor framework, potentially increasing the eligible pool to 400,000 by including securities market assets as a criterion. In the SME sector, the regulator is considering raising the market capitalization limit for IPO listings to ₹4,000 crore and removing minimum trade size requirements to improve liquidity.

Regarding market stability, SEBI Chairman Tuhin Kanta Pandey stated that no manipulation has been observed in the newly introduced closing auction sessions. He noted that the system is designed to benefit passive investors and ensure transparent pricing. Furthermore, the regulator has lowered the Z-score limit for stress testing in commodity derivatives from 10 to 5 to facilitate ease of doing business. SEBI is also expected to release findings regarding retail investor losses in the derivatives market shortly.