The Securities and Exchange Board of India (SEBI) on Tuesday proposed increasing client-level position limits for agricultural commodity derivatives and rationalising penalties for violations of such limits.

Position limits control the number of contracts a trader can hold in a specific commodity at a given time aimed at curbing excessive speculation and preventing a concentration of positions.

“The current position limits were introduced in 2017, aligned with market conditions prevailing at that time. Since then, the market has evolved significantly in terms of participant base and product offerings and higher limits could improve liquidity, deepen markets, and aid price discovery,” SEBI said.

Agricultural commodities are classified into three categories: broad, narrow, and sensitive. Sensitive commodities are prone to government or external interventions, such as stock limits, import-export restrictions, or other trade barriers.

The broad category comprises commodities that have an average deliverable supply of at least 10 lakh metric tonnes over the previous five years, along with a minimum monetary value of ₹5,000 crore. Commodities that do not fall under either the broad or sensitive category are classified as narrow.

The regulator has proposed increasing the overall client-level open position limits for broad agricultural commodities to 2 percent of deliverable supply from the current 1 percent.

For narrow commodities, the limit would rise to 1 percent from 0.5 percent, and sensitive commodities would see a boost to 0.5 percent from 0.25 percent.

Overall client-level open position limits for each commodity are calculated based on its annual deliverable supply.

The regulator has also proposed revising the definition of the broad category by allowing commodities to qualify if they meet either the quantitative threshold of 10 lakh metric tonnes or the monetary threshold of ₹5,000 crore.

For violations of up to 2 per cent, the same formula would apply, subject to a cap of ₹10,000. Those exceeding 2 per cent of the prescribed limit, the penalty would be calculated as: excess position multiplied by the closing price, number of days of violation, and 2 per cent, or ₹2 lakh, whichever is lower.

In cases where violations exceeding 2 per cent occur more than three times in a month, the concerned member would be placed under square-off mode for one trading day. Repeated violations beyond three instances in a month would also attract an additional penalty equivalent to the original penalty imposed.

Published on May 12, 2026